B U S I N E S S

Focus shifts to Punjab firms
SEVERAL scrips of the companies promoted by the Punjab Government were on fire last week in the stock market. The reason: The Punjab Government has decided to disinvest its holdings in the companies such as Punjab Alkalies and Chemicals, Punjab Communications, Electronic Systems Punjab and the Punjab State Industrial Development Corporation’s holding in Punjab Tractors Limited.

• PTL

• Likely buyers

• Probable price

• Punjab Alkalies & Chemicals

• PunCom

Antiglobalization activists carry a huge banner with thousands of photographs of supporters during a march at Seville's Barqueta bridge on Saturday. Thousands of anti-capitalist demonstrators marched peacefully through the Spanish city of Seville on Saturday at the end of a European Union summit that launched a crackdown on illegal immigration.  — Reuters

CHECKOUT

Orders bring cheer to phone subscribers
IN the recent months, the apex consumer court has dealt with three important issues pertaining to the quality of basic telephone services — fault repair, billing and time taken for providing a new connection. Its orders in all three should bring cheers to consumers.

HOW I STARTED

Turning adversity into opportunity
Ludhiana
“Barely out of my teens, nature was unkind to me when it snatched away my father, leaving the entire family in a state of shock and financial chaos. Unmindful of the future, I decided to conserve and consolidated the family wealth and put it into a venture that would secure the future of the family’s kin”, says Mr Gopal Bhushan Gupta, Managing Director, Ludhiana Flour and General Mills, (Pvt) Limited.

• Initial Difficulties

• Future plans

Media, FMCG scrips may lead rally
Mumbai, June 23
Despite the continued selling pressure by foreign and domestic institutional investors, shares in media, software and FMCG companies are likely to lead a rally on major domestic bourses in the coming week, say analysts.

ANALYST’S DIARY

Air-conditioner market hot
WITH the decline in air-conditioner prices and the temperature upswing, the air-conditioner market has been on the upswing. Unlike other home electrical appliances, air-conditioners have enough room in the market and is far from reaching the saturation point. Thus, while other consumer durables may be slowing down, the Rs 2,000 crore retail air-conditioner market is expected to grow by a scorching 20 per cent during the year. Hot, isn't it?

Tax liability
Q: I am retired Haryana Government employee. My date of birth is 5.1.1937. Being senior citizen, kindly guide me my tax liability and rebate/exemption under various income-tax law/Acts, with total amount.

• Capital gain

• Norms for tax exemption

Investors lose ‘trust’ in UTI
Mumbai, June 23
The 35 lakh investors in UTI’s US-64 scheme, who did not avail its repurchase plan at a guaranteed price, feel let down by its skipping dividend and some of them said they lost “trust” in the scheme.

SBI Chairman rules out another VRS
Kolkata, June 23
SBI Chairman Janaki Ballabh said there was no plan to come up with another round of VRS in the near future. “We don’t have any plan to come up with a second round of VRS. We are actually looking to appoint new people to deploy them in new areas in which the bank will be venturing into the future,’’ Ballabh told reporters here.

Tata, Hyundai interested in PAL-Peugeot
Mumbai, June 23
As many as seven international and domestic auto majors, including Tata Engineering, Hyundai Motors, Volvo International and Skoda Motors, have evinced interest in properties of PAL Peugeot Ltd (PPL), a joint venture between Premier Automobile Ltd (PAL) and French company Peugeot.

• Inflation inches up to 1.87 pc

Focus shifts to Punjab firms
Lalit Batra

SEVERAL scrips of the companies promoted by the Punjab Government were on fire last week in the stock market. The reason: The Punjab Government has decided to disinvest its holdings in the companies such as Punjab Alkalies and Chemicals, Punjab Communications, Electronic Systems Punjab and the Punjab State Industrial Development Corporation’s (PSIDC) holding in Punjab Tractors Limited (PTL).

The decision for disinvestment is very simple. Despite a total investment of Rs 8,234 crore by the Punjab Government in the state PSUs and cooperative institutions, these units are virtually not giving any return to the government and incurring losses of over Rs 185 crore every year.

Punjab Finance Minister Lal Singh, while presenting the Budget, laid stress on a fast track disinvestment in these companies. As everyone has already seen the phenomenal returns generated by the disinvestment programme of the Government of India, some Punjab companies can command good prices in the disinvestment process and are worth buying at the current prices.

Name of company	Stake to be offloaded	Likely Buyer	Price Range (share)	Recommendation
Punjab Tractors Ltd	23.49 per cent	M&M, John  Deer, Eicher, New Holland	Rs 275-300	Buy
Punjab Chemical & Alkalies Ltd	NA	Tata Chemical Gujarat Chemicals & Alkalies	Depends on  the synergies with the buyers	Avoid
Punjab Communication Ltd	70 per cent	Tata Telecom, Shyam Telecom	Rs 100-120	Buy now and exit above Rs 100

PTL

The PSIDC, according to the Punjab Government, had total liabilities of Rs 660 crore on March 31, 2001, whereas the corporation’s standard assets stood only at Rs 79 crore, thereby leaving a gap of Rs 581 crore. Punjab Tractors and Punjab Alkalies and Chemicals are capable of providing good returns to the corporation with their shares of these companies, along with management control on sale.

Punjab Tractors is likely to be the first to hit the block. PTL is a joint venture project of the Swaraj group and the PSIDC. While the PSIDC has cleared the sale of its stake, it is required to be approved by the state government. The PSIDC holds a 23.48 per cent stake in the company.

PTL is the second largest tractor maker in India with a total market share of 20 per cent in the country.

Likely buyers

Likely buyers for the PSIDC’s stake can range from a tractor giant like Mahindra & Mahindra to the sector’s smaller players like TAFE. Buyers can also be some multinational companies such as John Deere and New Holland.

Though Mahindra & Mahindra has shown keen interest in buying out the stake of the PSIDC, we believe that the acquisition of the Punjab Tractors will be more beneficial for the multinational companies like John Deere and New Holland, which are relatively smaller players in India. John Deere has a presence in the domestic tractor industry through a 50:50 joint venture with the diversified conglomerate Larsen & Toubro.

Probable price

If the PSIDC’s entire stake is disinvested at the current market price it will fetch Rs 240 crore. Is that a good enough price of a company like PTL? Looking at the current disinvestments this price for PTL will be on the lower end of the spectrum. PTL has a total network of 350 dealers and it is the second largest and most profitable company in the tractor industry. In addition it has excellent brand equity in the tractor industry. Therefore, in the light of Maruti sale, any disinvestment has to be at a substantial premium to the current market price. We believe that the disinvestment of PTL in the range of Rs 275-Rs300 will be more appropriate.

Punjab Alkalies & Chemicals

Another company which is going to be among the first few to be put on the block is Punjab Alkalies & Chemicals Limited. The company is not what it used to be since it started incurring losses in 1998. But the disinvestment of the company will bring the much-needed relief to the balance sheet of the PSIDC.

Pacl manufactures caustic soda, chlorine-liquid and hydrochloric acid. These three products contribute to more than 95 per cent of the turnover of the company. Last year with its the turnover of Rs 172 crore, it reported a loss of Rs 5.51 crore. The total losses carried forward last year were of the order of Rs 24.15 crore.

Probable buyers of the company include Tata Chemicals, Gujarat Alkalies and Chemicals and Modi Alkalies and Chemical.

The price that any of these companies is willing to pay for PACL will depend on the synergies that it sees on taking over PACL. In any case, no buyer is willing to pay a substantial premium to the share price of Rs 19.6 that the company scaled last week.

PunCom

The scrip of Punjab Communications Limited (PCL) has gained 55 per cent at Rs 75.60 in the last 22 trading sessions on talks of disinvestment. A panel on telecommunications has recommended that the Punjab Government should sell its holding in PCL to a strategic partner. As on 31 March 2002, the Punjab Government held 70 per cent stake in the company.

The panel has suggested that the divestment should take place in two phases. In the first phase, 43.96 per cent equity will be sold to a strategic partner. This partner should also purchase the balance 26 per cent two years later.

PCL was incorporated in July, 1981, by the Punjab State Electronics Development and Production Corporation to manufacture direct-to-line multiplexing equipment. Later, it diversified into the production of pulse code modulated multiplexers, trans-multiplexers, voice frequency telegraphs, rural automatic exchanges and digital VHF radios. The major users of these products are DoT, Railways, Defence, state police organisations, ONGC and VSNL.

For the year ended March 31, 2002, PCL registered a 42.4 per cent rise in the net profit to Rs 5.88 crore on a 7 per cent rise in net sales to Rs 157.46 crore.

The likely buyers of PCL can range from Tata Telecom to Shyam Telecom. The price that these companies is willing to pay will depend on the synergies that these companies see in taking over PCL. But given the fact that PCL has good foothold in the telecommunication industry, the price will at least be in three figures.

CHECKOUT

Pushpa Girimaji

IN the recent months, the apex consumer court has dealt with three important issues pertaining to the quality of basic telephone services — fault repair, billing and time taken for providing a new connection. Its orders in all three should bring cheers to consumers.

Let me begin with the case of Har Krishan Lal Kamboj vs GM Telephones, Ferozepore. Here, the complaint pertained to a telephone in Abohar, Punjab, which remained dead for 37 days despite 10 complaints lodged with the service provider. The District Consumer Disputes Redressal Forum, before which the complaint was first filed, accepted the explanation of the service provider that the long interruption in service was caused on account of the conversion of the exchange to C-Dot electronic exchange. As per telephone rules issued by the Department of Telecommunication, the subscriber was given rebate in rent for the period during which the telephone remained dead. On this basis, it held that there was no negligence or deficiency in the service provided by the department. This was upheld by the state commission too.

Mr Kamboj, however, was not ready to give up and filed a revision petition before the National Consumer Disputes Redressal Commission. On being questioned by it, the service provider admitted that as many as 1,000 telephone lines had remained non-functional for 37 days on account of the conversion work. When asked whether the subscribers were informed about the work and its consequences on their connections, the representatives of the service provider said the complainant was “orally informed” about it.

The apex consumer court was unwilling to accept such casual attitude of the service provider towards the subscriber. Commented the apex consumer court. “If the setting up of a new exchange meant inconvenience to consumers in terms of their telephones remaining non-functional, the least that the department should have done was to inform the subscribers of this through a circular. This was not done. Had the consumer been informed of this, he would not have been lodging complaints day after day.

Taking a serious view of the way the department had treated the subscriber, the commission set aside the orders of the lower consumer court and said Mr Kamboj was entitled to a compensation of Rs 20,000 besides costs of Rs 2,000 for the deficient and negligent service provided.. (RP No. 1204 of 2000, decided on 23-1.2002).

In the case of Lt-Col Balbir Singh (retd) vs The General Manager, Telephones, Faridabad, too, the consumer disputes redressal agencies at the district and the state levels held that a delay of two months and three weeks in shifting a telephone connection from Jabalpur to Faridabad was not unreasonable and therefore did not constitute deficiency in service. Both, therefore, dismissed the complaint.

The National Consumer Disputes Redressal Commission, however, disagreed. Pointing out that no reason had been given by the service provider as to why there was a delay of almost three months when the turn of the consumer for installation of the telephone had come, the apex consumer court said in the commission’s view, this would certainly amount to deficiency in service. “In these days when telephone has become a necessity, any delay in installation or shifting has to be sufficiently explained,” the apex court commented. It also criticised the consumer forums at the district and the state levels for dismissing the complaint and said they had failed to exercise the jurisdiction vested in them under the Consumer Protection Act. It awarded the consumer a compensation of Rs 5,000.

Usually, when a consumer seeks compensation for a deficient service, he or she is required to provide evidence in support of the claim. This is also meant to help the consumer forum assess the quantum of compensation that could be awarded. In this case, however, the national commission held that where there was an unexplained delay on the part of the service provider in either shifting or installing the telephone, it was not necessary for the consumer to prove any loss or inconvenience. (RP No. 658 of 1999, decided on 7-3-2002).

The third case pertains to a dispute over three inflated bills raised by the General Manager, Telecom, Punjab, and the disconnection of the telephone of the subscriber, a senior citizen, following his failure to pay these. In this case, the national commission agreed with the view of the state commission that the three inflated bills amounting to Rs 66,313 be quashed, the telephone be reconnected and the consumer paid a compensation of Rs 15,000 besides awarding costs of Rs 2,000. It also directed that in lieu of the quashed inflated bills for the three billing cycles, the service provider raise three bills of Rs 320 each.

Orders such as these and the new amendments to the Consumer Protection Act (the amendment Bill is pending before Parliament) empowering the consumer courts to issue interim orders and also award punitive damages would help consumers get a better deal from not only the service providers but also the consumer forums. The power to issue interim order would be particularly helpful in restoring a telephone connection pending disposal of a case.

HOW I STARTED

Turning adversity into opportunity

Ludhiana
“Barely out of my teens, nature was unkind to me when it snatched away my father, leaving the entire family in a state of shock and financial chaos. Unmindful of the future, I decided to conserve and consolidated the family wealth and put it into a venture that would secure the future of the family’s kin”, says Mr Gopal Bhushan Gupta, Managing Director, Ludhiana Flour and General Mills, (Pvt) Limited

“Unsure and shaken after the tragedy, with the help of some friends and well wishers I began to explore various businesses. Ball bearings were something new and it was fast replacing the conventional mechanical system. I immediately jumped into this business and started a shop in Ludhiana, about 30 years ago. As the technology picked up, work increased and I set up another shop in Delhi selling top brands like Sri Ram Bearings, FAG, ABL (Asian Bearings) etc. Business wise I did well, but ever increasing involvement did not give me the opportunity to pursue my studies after school”, Mr Gupta recalls with mixed feelings.

Business brought prosperity, but I was always looking for more avenues and areas to diversify with the money I had made in a decade. Finally in 1979, the Government of India announced its policy to grant licenses for roller flourmills with a production capacity of 30 tonnes per day. Even though, I knew nothing about a flourmill or what it would entail, I applied for a license and fortunately got it. It was a license for a mini flourmill. By 1982 I had put up a unit with an initial investment of about Rs 20 lakh. The turnover in the very first year touched Rs 20 lakh and went up to Rs 80 lakh in the second year. By the year 1999-2000 the turnover of my units touched Rs. 25 crore. But the last one or two years have seen a downfall of about 20 per cent in turnovers due to fluctuating government policies on procurement prices of wheat. Despite the setback, my mill has no borrowings.

Initial Difficulties

This was around the time when I first started interacting with any government department and realized what a horror red tape could mean for an entrepreneur who was just starting off. Right from trying to get finances, procuring and renewing licenses was all an experience in itself. By 1983 my unit was up and functional, but I discovered that I could not buy any grain from market due to government policies and that all sourcing for food grain was through the Food Corporation of India or the State Government. Fortunately for me around 1986 liberalisation started and by 1990 things got de-controlled to a large extent. Seeing things open up, we went ahead with gusto and put up another unit at Chandigarh in partnership with my nephew.

Once things began to settle down, I got interested and involved in associations that worked for the rights of millers. As a consequence I got elected as President, Punjab Roller Flour Mill Association. In 1998 I contested and got elected as the Senior Vice President of the Roller Flour Mills Federation of India, only recognised body of roller flour mills.

Future plans

Diversify into trading with multinational companies like Nestle for noodles etc. Planning to diversify into industry that will use own raw material, like bakery, noodles, etc, besides contemplating with exports of wheat products.

(As told to Naveen S. Garewal)

Media, FMCG scrips may lead rally

Mumbai, June 23
Despite the continued selling pressure by foreign and domestic institutional investors, shares in media, software and FMCG companies are likely to lead a rally on major domestic bourses in the coming week, say analysts.

A surge in the profitability of software companies is certain as results are in the offing, said the chief dealer with a leading broking house.

The 30-scrip BSE Sensex finished the week lower by 69.32 points at 3242.75 on June 21 as compared to the previous week’s close of 3312.07.

The S&P CNX Nifty finished lower by 23.15 points at 1062.55 over the previous week’s close of 1085.70.

Excepting a one day uptrend, stock markets remained in the negative zone during the week.

Foreign institutional investors (FIIs) pressed sales all through the week withdrew investments worth Rs 448 crore from equities.

Mutual funds too followed the FIIs in the last week and recorded a net outflow of Rs 143.45 crore from the equity market.

Market sources believe that old economy stocks are likely to remain under pressure in the coming week.

While Infosys Technologies acquisition of Trade IQ, brought Infosys shares to limelight, the Securities Appellate Tribunal’s (SAT) withdrawing a SEBI ban on BPL and Videocon for accessing capital market brought Videocon and BPL into limelight towards the weekend.

The reported possibility of a split in the Bajaj group reflected in the share price of the group’s companies. Bajaj Auto scrip suffered a moderate setback on Friday.

Marketmen expect second line stocks to continue the upward march in the coming week on selective buying interest.

The overseas trend particularly on US bourses affected market sentiments on domestic bourses in the past week. UNI

ANALYST’S DIARY

Air-conditioner market hot
Ashok Kumar

WITH the decline in air-conditioner prices and the temperature upswing, the air-conditioner market has been on the upswing. Unlike other home electrical appliances, air-conditioners have enough room in the market and is far from reaching the saturation point. Thus, while other consumer durables may be slowing down, the Rs 2,000 crore retail air-conditioner market is expected to grow by a scorching 20 per cent during the year. Hot, isn't’ it?

The government’s moves to bring down duty structures have helped enormously. The slashing of duty structures has enabled the industry to fight back competitors from the unbranded sector. Industry sources reckon that the unbranded sector now has its back to the wall and its share has fallen sharply from 70 per cent of the market to about 20 per cent. Coupled with this is the competition, which has helped to push down prices by around 8 per cent to 9 per cent since last year. Pricing has become extremely competitive in recent years. Today, the cheapest models in the market are selling for less than Rs 20,000 and that has brought them within the range of the large Indian middle-class. Furthermore, with banks flush with funds it has become easier than ever before to get loans for consumer durables.

As in every story, there is a flip side too. While sales are booming, so are the number of competitors. A handful of multinationals are making the older players sit up by introducing new technology and cheaper machines pushed hard by big advertising bucks. There are now 15 major companies battling for a cooler spot in the market. 

TAX & YOU

R.N. Lakhotia

Tax liability

Q: I am retired Haryana Government employee. My date of birth is 5.1.1937. Being senior citizen, kindly guide me my tax liability and rebate/exemption under various income-tax law/Acts, with total amount.

i) Standard deduction.

ii) Fixed deposit in the bank.

iii) Fixed deposit in the post office.

iv) Monthly deposit scheme in the post office.

v) Income from the house rent.

Whether the income on the fixed deposits/scheme is to be shown on its maturity or yearwise in the income-tax returns.

— Prem Batra, Panipat

Ans: The interest income from Fixed Deposit Scheme, etc. is to be shown on yearly basis hence in the income-tax return accrued yearly interest should be shown as income. As a senior citizen you are eligible to tax rebate u/s 88B to the extent of Rs 15,000 per year. In respect of your interest income from bank fixed deposit, Post Office Fixed Deposit and the Monthly Deposit Scheme of the Post Office, the total deduction available to you is Rs 9,000 as per Section 80L. In respect of income from house property derived by you, you will enjoy a deduction of 30 per cent of the annual value (house rent — house tax).

Capital gain

Q: I purchased a flat under partially self financing scheme from an approved development authority. It’s first payment was made on 16.8.86 and last on 26.9.97. Possession of flat was taken over on 5.8.96 and lease deed executed on 10.3.2000. Please advise from which date its cost escalation has to be worked out for calculating capital gains in case of sale of flat.

— A.K. Mehta, Kangra

Ans: If you want to sell the said flat at a later date you will be enjoying the benefit of Cost Inflation Index for the financial year 1996-97 as the possession of flat was taken over in the year 1996. Hence that will be the date of purchase of your property.

Norms for tax exemption

Q: I have the honour to approach you for knowing the rules on exemption from Income Tax from — service pensioner officer, getting disability pension and service pension elements.

2. I am getting disability pension since 1987 on my retirement. Total monthly pension is Rs 10260. (Basic pension Rs 7350, disability 20%, Rs 447, DA 43% — Rs 3353, Medical Allowance Rs 100. Grand total — Rs 11260 less commutation Rs 990 total comes Rs 10260).

3. The Income Tax has been deducted from my pension for period upto March 2001 by the DPDO and no exemption has been considered.

4. I have learnt that pensioner, getting the disability pension are exempted from income-tax for their entire pension elements.

5. You are requested to please intimate the rules giving the date of admisilabity. The procedure for claiming the refund if applicable.

— Sher Singh, Lt. Col., Hisar

Ans: As per circular issued by CBDT to the Army Organisation, disability pension is exempt from income-tax. You should, therefore, approach your office not to deduct tax in respect of the same. You may better write to the Central Board of Direct Taxes, North Block, New Delhi-110001 to get the clarification in respect of the disability pension. If, however, tax has already been deducted at source while filing your income-tax return you may claim exemption in respect of the disability pension and get refund.

Investors lose ‘trust’ in UTI

Mumbai, June 23
The 35 lakh investors in UTI’s US-64 scheme, who did not avail its repurchase plan at a guaranteed price, feel let down by its skipping dividend and some of them said they lost “trust” in the scheme.

The scheme started announcing its net asset value from December 31, 2001. It had declared a dividend of 13.75 per cent in June 2000, and 13.50 per cent in the preceding year. In June, 1998, it declared a dividend of 20 per cent. UNI

SBI Chairman rules out another VRS

Kolkata, June 23
SBI Chairman Janaki Ballabh said there was no plan to come up with another round of VRS in the near future.

“We don’t have any plan to come up with a second round of VRS. We are actually looking to appoint new people to deploy them in new areas in which the bank will be venturing into the future,’’ Ballabh told reporters here.

“We require personnel for focussed aggressive marketing,’’ he said.

The SBI was looking to appoint a consultant for human resource development for optimum utilisation of workforce as the bank would soon aggressively market insurance products after getting clearance to this effect.

“Our existing employees will be trained to market insurance products that will be sold from branches,’’ he said.

Ballabh said insurance was a very important business for the SBI. “Our products are very simple and can be bought just over the counter of any branch. I hope that the bill on selling insurance products by banks will be passed in first few weeks of the monsoon session of Parliament.’’ PTI

Tata, Hyundai interested in PAL-Peugeot

Mumbai, June 23
As many as seven international and domestic auto majors, including Tata Engineering, Hyundai Motors, Volvo International and Skoda Motors, have evinced interest in properties of PAL Peugeot Ltd (PPL), a joint venture between Premier Automobile Ltd (PAL) and French company Peugeot.

The other parties interested in the land, plant and machinery of PAL-Peugeot, currently put on the block by financial institutions led by ICICI for recovery of their dues, are Ashok Leyland, Mahindra & Mahindra and Malaysia-based Kia Motors, industry sources told PTI here today.

The properties were kept open for inspection on June 20 and 21 while the auction would be held on July 5 as the bids would have to be submitted latest by July 4, they added. PTI

Inflation inches up to 1.87 pc

New Delhi, June 23
A surge in petrol and high-speed diesel oil prices coupled with costlier primary and manufactured items pushed up inflation rate by 0.37 per cent to 1.87 per cent in the week ended June 8.

Point-to-point inflation rate based on wholesale price index (WPI) continued its upward trend from 1.5 per cent in the previous week, but was lower than 5.44 per cent a year ago. PTI