Economic News
for the week of October 10 - 16, 1999

Economic News

1. India's industrial growth spurts to 6% in April - August 1999

2. TRAI powerless to guide government on basic telecom: High Court

3. Optimal utilization of resources in coal sector

4. 10 Indian Companies to list on NYSE in 12 months

5. Export led economic growth to be pushed

6. Power on demand by 2010

7. NAFED gears up for price support operations

8. Indian government to deregulate fertilizer industry

9. International jewelry exhibition begins in India on October 22, 1999

10. No major changes likely in Insurance Regulatory Authority bill

Policy Update

1. New agriculture policy to make changes in farm practices

FDI Approvals

1. ABN Amro Lease Holding to set up subsidiary in India

Bilateral Trade  

1. Indian government will protect domestic industry

2. Utah appoints first trade counselor to India

Corporate News

1. Shipping Corporation of India earmarks Rs. 15 billion for raising tonnage by 30%

2. Hero Honda profit up by 44%

3. Yamaha agrees to reduce stake in Indian Joint Venture

4. National Semiconductor Corporation  draws India specific plans

5. Polaris registers huge jump in second quarter net profit

6. Infotech major Satyam's second quarter net profit rise by 67%

7. Software major Aptech seeks to make strategic acquisitions

8. HPCL presents a dividend of Rs. 1.26 billion

9. NIIT global revenue crosses Rs. 8 billion mark

10. Rediff, Citibank forge alliance to boost e-shipping

Economic News

India's industrial growth spurts to 6% in April - August 1999

Powered by a buoyant manufacturing sector, industrial growth spurted to six per cent in April-August 1999-2000 compared to 4.2 per cent in the same period last year. In August this year, industry recorded a 6.3 per cent growth against 4.4 per cent growth posted in the same period last year, according to the quick estimates of index of industrial production by the Central Statistical Organization (CSO). Industrial production during July recorded a growth of 5.4 per cent as against 3.4 per cent a year ago. Manufacturing sector, which accounts for about four-fifth of the total weight of IIP, grew by 6.7 per cent in the first five months of this fiscal against 4.2 per cent in 1998-99. In August, the sector grew by 6.1 per cent as compared to 4.5 per cent last year. However, the mining sector continued to show a negative growth of 0.3 per cent in April-August though the sector grew by 1.9 per cent in August.

TRAI powerless to guide government on basic telecom: High Court

In a major blow to Telecom Regulatory Authority of India (TRAI), Delhi High court has held that the regulatory body did not have powers to give directions to government on issuing licenses to basic telecom services providers. The ruling was given by a division bench which upheld an earlier judgement of the court on the same lines and dismissed a bunch of appeals filed by private telecom operators against the court's earlier ruling. The bench comprising Justices Arun Kumar and Manmohan Sarin said "licensing powers of the Government are statutory powers which cannot be allowed to be interfered or subjugated to another authority." The court said TRAI was a creation of the statute and its powers and functions were governed by the TRAI act. Earlier, Justice Usha Mahra had also held the same view which was challenged by various telecom operators and TRAI itself.

Optimal utilization of resources in coal sector

Optimum utilization of resources in the coal sector and not its privatization holds the key to its problems, according to the Minister of State for Mines and Minerals Rita Verma. "The major problem of the coal sector is excessive labor and it can be overcome through optimal utilization of resources in various public sector coal companies", Verma said. High royalty rates in various coal producing states was another problem, the minister added. However, coal off-take has increased by 4.6 per cent in the first six months of the current fiscal compared to negative growth last year, she added. In addition, there has been a decline in the dues of coal companies by Rs. 2 billion from various state electricity boards during that period. "All these factors are positive indicators of the good performance of the coal sector," the minister said.

10 Indian Companies to list on NYSE in 12 months

After an overwhelming success of ICICI Ltd., 10 more companies from India are expected to list their shares on the New York Stock Exchange (NYSE) in the next twelve months, according to the top NYSE official. "In the next 12 months, we expect about 10 Indian companies to list on NYSE," James E Shapiro, vice-president, Asia Pacific of NYSE said. He said many Indian companies were anxious to send a message to investors that they have adopted stringent accounting and disclosure norms. "Nothing sends this message quite like a Securities Exchange Commission (SEC) registration and a listing on the NYSE," Shapiro said. Shapiro, who is also in charge of new listings from the Asian region, however, declined to disclose the names of firms which have already approached the American bourse for listing. Companies like state-owned Videsh Sanchar Nigam (VSNL), largest commercial bank State Bank of India (SBI), state-owned Mahanagar Telephone Nigam (MTNL), Pentafour Software, Satyam Computers have already announced plans to list their stocks on the U S stock exchange. "You will see some major technology companies from India list on American bourses in the near future. Other leading companies from other sectors are also in the advanced stages of preparations," the NYSE official said.

Export led economic growth to be pushed

The commerce and Industry minister Murasoli Maran has said the government's thrust will be to promote "export-led growth" and the two ministries have been merged to create the necessary synergy for this purpose. Listing out the priority areas, Maran said the software and electronics exports would be given a "real big push" as part of efforts to diversify India's export basket so far dominated by traditional items like textiles and gems and jewelry. Maran said his approach would not be to "tinker" with the existing policies, but to make Indian industry globally competitive to face the new challenges and boost exports.
The country had set a modest target of 10 to 12 per cent export growth this year and aimed to achieve the targeted GDP growth of 7-8 per cent helped by a healthy industrial growth, he said.

Exports in first five months of this fiscal recorded a 4.62 per cent growth over last year while the industrial growth spurted to six per cent in April-Aug 1999 compared to 4.2 per cent in the same period last year. "Achieving a quantum jump in exports will be a top priority", Maran said, adding radical reforms were contemplated in attracting foreign direct investment (FDI), labor laws, customs procedure and foreign exchange regulations.

Power on demand by 2010

The Indian government has said power will be made available on demand by the year 2010 as against the peak shortage of 12,000 MW at present. Outlining the '100-day agenda' for his ministry to spur reforms and implementation of projects in both public and private sector, the Power Minister P R Kumaramangalam said an annual investment of upto Rs 60 billion, including budgetary support of Rs 30-40 billion, would be made to overcome the power shortage.

Emphasizing on the need for toning up financial health of the state electricity boards (SEBs), which owe the central power and coal utilities a staggering Rs 290 billion, he said he would soon take approval of the cabinet to securities dues of state-owned units. "We were about to send the proposal for clearance of dues of Rs 120 billion (Rs 80 billion of power PSUs and Rs 40 billion of Coal PSUs) through securitisation when the elections were announced," he said emphasizing that it would help clear the balance sheets of the central utilities. He said that power ministry had already sorted out the issue with the financial institutions and the federal bank Reserve Bank for issuance of bonds to the central utilities carrying an interest of 10.5 per cent interest and these bonds should be tradable. "This will give them much-needed financial strength to execute their ongoing and new projects," Kumaramangalam said and clarified that securitisation would be for a period of seven years.

NAFED gears up for price support operations

The apex body National Agriculture Cooperative Federation (NAFED) has geared up to carry out price support operations for oilseeds and pulses procurement with Kharif crop expected to arrive in the markets soon. A meeting with chief executives of state co-operatives and oilseed growers' federations was held on Friday for working out the details. The meeting discussed operational arrangements, agency agreements, grade specification, mandi facilities and monitoring. NAFED is the central nodal agency for undertaking price support operations and has been procuring declared agricultural commodities under support prices on a regular basis since 1977 to protect farmers' interests. According to the Priyadarshi Thakur, managing director of NAFED said production of kharif oilseeds was expected to be at the level of 12 million tonnes during the current season as against 16.3 million tonnes during last year. The production of pulses was expected to be at the level of 5.57 million tonnes during the current season as compared to 6.11 million tonnes last year.

Indian government to deregulate fertilizer industry

The Indian government would soon initiate measures to deregulate the fertilizer industry to cut down its "over-dependence" on subsidies and enable manufacturers to stand on their own, according to the new Fertilizer and Chemicals Minister Suresh Prabhu. Prabhu said he would also soon draw long-term plans for fertilizers, pharmaceuticals and chemicals sector to rid them from the present day Maladies. Despite being important segments in the Indian industry these were "unfortunately" neglected till now, Prabhu said emphasizing that an overhaul in these sectors was essential to enable them become competitive and realize the export potential.

"So far, fertilizer sector has been kept under over-regulation largely to attain food security. Unfortunately, this has prevented its development and the industry is dependent on government support in the form of subsidy," he commented. But the regulations should be done away systematically and in a phased manner so that the interest of consumers are not hampered, Prabhu said. 

International jewelry exhibition begins in India on October 22, 1999

A four-day exhibition showcasing latest in the jewelry industry, 4th Delhi International Jewelry and Watch Exhibition (DIJE) will begin in Delhi from October 22. The show supported by World Gold Council will also hold a workshop by Italian Trade Commission, to provide a platform for one-to-one interaction between Indian and Italian jewelers. "DIJE'99 will provide a stronger platform, as it has already attracted greater international confidence which has been reflected in the increased global participation," according to managing director of I. T. E. Group India, M Sharma. 

No major changes likely in Insurance Regulatory Authority bill

Indian Government has indicated that there will not be any major changes in the Insurance Regulatory Authority (IRA) Bill, proposed to be introduced in the first session of the 13th Lok Sabha. "There will not be any major changes in the IRA bill which was tabled in the Rajya Sabha by the previous government," according to the Special Secretary (Insurance), B K Chaturvedi. The IRA Bill had proposed an equity cap of 26 per cent for foreign insurance companies planning to start operations in the country. On the query whether the bill would be tabled in the coming session of Parliament, he said it was upto the Cabinet to take a decision.

The finance minister Yashwant Sinha had said that new government would introduce the Bill in the first few days itself. Stating that government was committed to opening up of insurance sector, Chaturvedi said this was aimed at bring in the much needed competition to the sector.

Policy Update

New agriculture policy to make changes in farm practices

India's National Agricultural Policy, under final stage of preparation, would focus on the optimal use of land, water and genetic resources in a suitable manner by making some major changes in farm practices said Dr P L Sanjeeva Reddy, Principal Adviser, Planning Commission. Reddy said plan would be to create both cold storages and processing facilities close to the production centers in rural areas to reduce wastage. Slow pace of agriculture marketing infrastructure have resulted in the huge wastage of post-harvest agriculture produce in the country, he said adding food grains wasted in India could have fed up to 117 million people for a year. A recent estimate by the ministry of food and civil supplies puts the total preventable post-harvest losses of food grains at about 20 million tonnes a year, which is nearly 10 per cent of the total production, he said.

Government has initiated several steps to improve marketing infrastructure in rural areas, he said adding during ninth plan period panchayats would also be encouraged to involve themselves actively in creating marketing facilities at rural level. Direct marketing would be promoted in the interests of both the producers and the consumers, he said.

FDI Approvals

ABN Amro Lease Holding to set up subsidiary in India

ABN Amro Lease Holding on Friday announced launch of it services in India by setting up a wholly owned subsidiary for helping companies in managing their vehicles, given to top executives and employees. The subsidiary, Lease Plan Fleet Management, would work for individual companies in procuring and financing of vehicles for their employees and also look after the maintenance and insurance parts besides buying back the vehicles after an agreed period of time, according to the company managing director Veerle Behets.

"When a company gives cars to its employees, it faces problems right from financing and buying to the operation and maintenance. Lease Plan offers services to help companies overcome the problems associated with traditional forms of buying, leasing and managing a fleet of vehicles," she said. The fleet management package also involves replacement of cars, chauffeur services, proactive insurance management, vehicle disposal and quarterly management reports profiling the performance of the customer's assets, she said.

Bilateral Trade  

Indian government will protect domestic industry

Newly appointed Indian Commerce and Industry Minister Murasoli Maran has said the government will continue with the policy of mandatory No Objection Certificate for setting up wholly-owned subsidiaries by multinationals to protect the domestic industry. "The guidelines for setting up wholly-owned subsidiaries by multinationals are very clear. They will have to submit an NOC from existing joint venture partners," Maran said. "If there are no restrictions on multinational companies setting up subsidiaries, then Indian industry will die," he said. Asked whether the government would review the decision to allow Pfizer Inc to set up 100 per cent subsidiary despite having a listed company in India, Maran said "we will go into it." However, he added that Pfizer's case was different as it did not have a joint venture in India. "Pfizer India is not a joint venture but a venture of Pfizer Inc," he added. Maran recalled that in his last stint as Industry Minister he had asked BAT to get a board resolutions from ITC for setting up 100 per cent subsidiary in India.

On Foreign Investment Promotion Board, he said even if the board was abolished its functions would have to be carried out by some other agency. Maran said the main priority of the government would be to increase the realization rate of foreign direct investment from present 30 per cent.

Utah appoints first trade counselor to India

After the United States, it is now the turn of its member states to open trade offices in India, with the state of Utah leading the way. Utah on Friday appointed Chandigarh (north)-based Pepsi franchisee Kewal S Dhillon as its first trade counselor to India as part of a move to directly promote bilateral trade. "The appointment of an exclusive trade counselor is an affirmation of our belief in the potential for enhanced bilateral trade relations," according to the Lt. Governor of the state of Utah, Olene Walker. Utah becomes the first state in the United States to open a trade office in India to exclusively market the trade and investment potentialities of the western state, Walker said adding that Utah industrialists were exceptionally bullish on India.

Corporate News 

Shipping Corporation of India earmarks Rs. 15 billion for raising tonnage by 30%

The state-owned Shipping Corporation of India (SCI) has decided to increase its tonnage capacity by about 30 per cent through acquisition of vessels at a cost of Rs 15 billion during the current fiscal. The SCI, which owned 115 ships, would acquire or order for tonnage of 1.457 million DWT during the year to face the increasing competition from the private carriers, SCI sources said. The government has approved an outlay of Rs 14.7887 billion for the acquisition and ordering plans, which would add to the current capacity of 4.996 million DWT, they said. This plan for the current year was chalked out under the Tonnage Acquisition Program during the ninth plan period, which comprised 44 vessels aggregating 1.95 million DWT and necessitating an investment of about Rs 45.15 billion over 1997-2002, the sources said. The SCI, which had acquired two ships and disposed of two others during 1998-99, however, has canceled or deferred some of the earlier contracts. The company's proposal to acquire two AFRAMAX tankers of 110,000 DMT each from M/s Halla Engineering & Heavy Industries of Korea has run into rough weather.        

The tankers, proposed to be delivered by end-1999, would not be acquired as the shipyard was declared bankrupt, and consequently, the contract signed during October 1997 with the shipyard was not made effective and terminated, the sources said.

Hero Honda profit up by 44%

Indian auto major Hero Honda has posted a sharp 43.8 per cent jump in net profit to Rs 429 million in the second quarter of the current fiscal by selling 33 per cent more motorcycles compared to sales in same period last year. The company also recorded a 42.3 per cent growth in its turnover. It increased to Rs 5.5 billion during July-September 1999-2000 from Rs 3.86 billion in the comparable period last year, according to the Hero Honda chairman and managing director Brij Mohan Lall Munjal. The motorcycle sale of the company increased to 176,860 units during the reference period from 132,968 units in July -September 1998-99. The net profit of the company during the first half of the current fiscal, however, increased by 54 per cent to Rs 813 million from Rs 527 million in the same period last year. Turnover of the company was up by 46.3 per cent to Rs 10.39 billion during April-September this year from Rs 7.1 billion in the corresponding period last year. Motorcycles sales was 37.2 per cent higher at 338,326 units in the first six months of the fiscal from 246,536 units sold in April-September a year ago.

Yamaha agrees to reduce stake in Indian Joint Venture

Escorts Yamaha Motorcycles (EYML), board has approved a proposal to divest 25 per cent stake of the promoters in the company to raise about Rs 1000 million in the current fiscal. The decision to bring in additional equity through private placement was taken by board of the motorcycle manufacturer last month in Singapore, according to the company sources. After the private placement the stake of Escorts group and Yamaha Motor Corporation of Japan in the 50:50 joint venture would go down to 37.5 per cent each. At present Escorts Yamaha has a paid up capital of Rs 270 million. The sources said the modalities of the private placement were being worked out and the company would soon appoint lead managers for the offer. Escorts Yamaha, the fourth largest motorcycle manufacturer in the country, is inducting fresh equity through Quit. private placement to raise resources for modernizing the existing facilities. The company has chalked out a plan to upgrade its existing models to meet Year 2000 emission norms, one of the most stringent emission standards in the world. The equity infusion would generate about Rs 1000 million to part finance Rs 5000 million modernization and expansion plan of the company, the sources said.  

National Semiconductor Corporation  draws India specific plans

US-based National Semiconductor Corporation has formulated a blueprint to expand its business activities in India by introducing a range of infotech appliances like set-top-boxes, which enables internet browsing through television. The company is in talks with at least three firms in telecom and consumer sector to license its latest state-of-the art digital technologies, according to the Martin Kidgell, Vice-President and managing director of National Asia Pacific. "We will offer technologies in the area of Set-Top-Boxes (STBs), Thin client and Digital Versatile Disks (DVD) and help companies launch the products in three to six months time," Kidgell said. "The revenue from Indian operations which contributed five per cent of the our total revenue was expected to double to ten million dollars next year," he said. The 2.5 billion silicon major entered India in 1995 and currently has a design center in Bangalore. The marketing is carried through Arrow and Future enterprises, both having a national channel network. "The company has forged an alliance with Bangalore-based VXL instruments Ltd. and HCL, Chennai and is planning to have atleast a dozen partners in two years time," said Sanjeev Keskar, Country Manager National Semiconductor. According to him the company would introduce web pads and recently launched Geode brand chips where the information appliance are integrated into a chip in India by 2000.

Polaris registers huge jump in second quarter net profit

The global software company Polaris software has registered an increase in its net profit at Rs 121.4 million for second quarter ending September against Rs 29.7 million recorded in the corresponding period last year. The company, which entered the capital market during this period in August, saw an increase in its turnover by 151 per cent to Rs 341.7 million for the period as against Rs136.4 million for the same period last year. The operating profit of the company increased to Rs174.7 million from Rs140.4 million during the same period. The company registered 235 per cent increase in its net profit from Rs.50.8 million to Rs170.3 million for the half yearly ended on September 30. Its turnover grew by 164 per cent to Rs605.4 million from Rs.229.6 million recorded same period last year. The operating profit of the company for the period increased to Rs234.5 million from Rs175.7 million.

Infotech major Satyam's second quarter net profit rise by 67%

Indian software major Satyam Computer Services Ltd. today announced a 67 per cent rise in net profit at Rs 307.4 million for the second quarter ended September 30 as compared to Rs 184 million during the same period last year. The total income for the three-month period of July to September rose to Rs 1,580milion from last year's Rs 918.9 million, the company said. The company said its second quarter net profit figure included the net profits of its three subsidiaries viz., Satyam Enterprises Solutions, Satyam Renaissance and Satyam Spark Solutions. The three subsidiaries were merged with the parent company in April this year.

Satyam also declared an interim cash dividend of Rs 1.50 per share. Last year the company paid an interim cash dividend of Rs 1.20 per share plus a final dividend of Rs 1.80 per share. The company's personnel expenses for the second quarter increased from Rs 57.6 million from the second quarter of last year's figure of Rs 35.3 million. Satyam's net profit of the first half-ended September 30 was Rs 565.8 million, up 68 per cent from Rs 337 million during the first half of 1998.

Software major Aptech seeks to make strategic acquisitions

Global infotech education major, Aptech Limited, is seeking to make strategic acquisitions that would contribute about half of the Rs 2,000 million of revenues projected from software business in 2000-01.
"Revenues from Software business, which was launched recently, are expected to be over Rs 500 million in 1999-2000 and touch Rs 1,000 million mark next fiscal, by when the company intends to make  acquisitions that will add a matching revenue," Aptech Chairman Atul Nishar said. The criteria for acquisition would be their capability to provide new market base or access for the company, he said adding no such company was identified so far. Aptech has its own offices in USA, Europe, Australia, SouthEast Asia and Gulf region.

Aptech would invest over Rs 500 million in developing software infrastructure during the next 12 months, which includes another development center, the details of which are yet to be worked out, he said. However, the company's core competency would remain education and training, which was expected to contribute about 70 per cent the revenues even after three years, he said. But the focus would shift from expansion of centers to revenue growth in the existing ones through more impetus to net-based education, he said, adding the present number of 1250 centers may go up to 1500 in the next three years.

HPCL presents a dividend of Rs. 1.26 billion

State-owned Hindustan Petroleum Corporation Ltd. (HPCL) has presented a dividend cheque of Rs 1.26 billion for 1998-99 to Petroleum and Natural gas Minister Ram Naik. Navaratna which posted net profits of Rs 9.01 billion for 1998-99 announced a dividend of 110 per cent and 1:2 bonus for the excellent performance, according to the HPCL statement. Expansion of corporates Visakh refinery (in south) from 4.5 million metric tonnes per annum (MMTPA) to 7.5 MMTPA has achieved completion, according to the chairman and managing director of HPCL H L Zutshi.

NIIT global revenue crosses Rs. 8 billion mark

India's Infotech major NIIT on Friday reported a 36 per cent increase in its global revenues at Rs 8.80 billion for the year ended September 30, 1999 even as it announced plans to enter into equity-based alliances with two companies by year-end. "We have made considerable progress to have one or two equity-based alliances before December," according to the NIIT president and CEO Vijay K Thadani.
The computer education major has already appointed Goldman Sachs as its advisor for the 100 million dollar US acquisition to be sealed by December 31. Earlier announcing the results, Thadani said the company's net profit for the year 1998-99 rose by a moderate 32 per cent to Rs 1.42 billion against last year's figure of Rs 1.08 billion. The board has recommended a 40 per cent dividend on an enhanced equity of Rs 380.66 million after the 1:2 bonus during 1998-99. NIIT's international business, which constitutes 52 per cent of total revenues, saw a growth of 46 per cent to touch Rs 4.53 billion. During the previous year, the company had reported a total revenue from overseas units of Rs 3.12 billion. "Software solutions business recorded revenues of Rs 3.98 billion, a growth of 47 per cent over the previous year," Thadani said.  

Rediff, Citibank forge alliance to boost e-shipping

India's leading on-line publication and e-commerce site Rediff has entered into an alliance with Citibank to boost internet trade especially during the festival seasons. As per the agreement, over one million credit card users of the bank can avail discounts and receive guaranteed gifts on the shop for the first time on the rediff.com site, according to the company statement. The two would also soon launch a privileged program for their overseas Non Resident Indians (NRIs) customers who have Rupee checking accounts with Citibank. This is to enable NRIs to buy products at special discounts for themselves and their beloveds in India. "Our alliance with Citibank in India and overseas is designed to provide our customers a fine e-shopping experience," Ajit Balakrishnan, Founder Chairman and CEO of Rediff on the net said.

The tie-up, aimed to attract more customers to on-line shopping will also conduct a slogan contest to popularize the new alliance. Citibank gold, Classic and Diners Club members can participate in the program.