6 may 2000

iffco inks insurance jv with japanese giant
mumbai: indian fertiliser cooperative iffco, will shortly sign an agreement with japan’s largest non-life insurance company, tokio marine & fire insurance to enter the non-life insurance business in india. iffco will pick up 74 per cent in the non-life insurance joint venture company, tokio marine will hold the rest.

the joint venture is the first of its kind — this is the first tie-up agreement by a japanese insurer in india. also, it’s the first time that a co-operative, namely iifco, is entering the insurance business.

although the main promoter is a co-operative — the insurance venture will be a company and will be governed by the companies act. according to sources, the venture could possibly require clearance from the registrar of co-operative societies, as insurance is an entirely different line of business for the fertiliser co-operative. however, with the government backing the venture, this is unlikely to be a problem.

in the non-life area, iffco’s captive business will come in handy. the fertiliser cooperative will use its network of societies as one of the main distribution channels for its insurance products. the company is also looking at introducing a special package for the fertiliser industry. further, iffco is active in rural areas and this will help the venture to respond to the government’s drive to optimise involvement in that area.

insurance is a capital-intensive business, and it is necessary that the promoters have strong financials. for, over the years they should be able to contribute to the growth and margin requirements.

besides tokio marine, three other japanese insurers have set up liaison offices in india. they include mitsui marine & fire, yasuda marine & fire, sumitomo marine & fire.
sources said that the japanese companies had been slower in finalising their entry plans in the country thanks to the changes going on in the japanese financial markets.

hsbc to launch a range of products & services
calcutta:given the change that is driving the indian banking industry in recent times, the hongkong and shanghai banking corporation (hsbc) has carved out a three-year strategy encompassing launching a whole range of products and services.

according to mr. zarir j cama, the bank’s chief executive officer in india, the parent company is to soon set up a wholly owned subsidiary in india to help in back-end operations in india. to be set up in hyderabad, the new entity named hsbc data processing will shortly employ about 250 people to run its operations in india.

the bank also plans to set up an asset management company and launch its own mutual funds, shortly. it may also set up a nbfc to handle the bank’s consumer finance portfolio, which is stated to be worth almost rs. 700 crore.

insurance is another area where hsbc is likely to focus on. mr cama said that talks were on with global insurance majors including royal & sun alliance, aig, commercial cgu to market their products in india.

internet banking and credit cards are next on the priority list of the bank.

5 may 2000

dbi may offload 50 per cent in new infotech company to shareholders
mumbai: the country’s leading development bank, industrial development bank of india (idbi), is planning to spin off nearly 50 per cent of its shareholding in idbi intech (itech), its newly formed infotech subsidiary, to the shareholders of idbi and divest the balance to a strategic partner after about three months of commercial operations.

this is being done to help idbi realise better value from its holding in itech which was incorporated as a 100 per cent subsidiary of idbi. simultaneously, idbi shareholders will benefit from a larger holding in the it company.

idbi has already inducted three idbi officials -- mr. s k chakrabarti, deputy managing director, mr. t m nagarajan its executive director and mr. b d ushir, legal advisor -- into the board of the it company. apart from these three independent directors, mr sadagopan, director of indian institute of information technology, bangalore, mr. s swaminathan, chief executive officer of iris, and a management expert from chennai are to be inducted at the next board meeting of the company in may, 2000. ultimately the board of the company is expected to have a total strength of 10 members.

idbi has also decided to appoint s s godbole, advisor in its information technology department, as the chief executive officer of the company. key officials in different vertical segments are to be hired in addition to 25-30 outside staff to enable the company to start off with a base of 100 employees.

while six to seven companies including domestic software majors and global it giants have evinced interest in picking up idbi’s stake in itech which has a paid-up equity capital of rs 50 crore, idbi officials feel that roping in a partner after the company gets going, will fetch a better valuation.

the company has already begun to start rendering services to other idbi group companies like the mutual fund and the capital markets company and has received enquiries with respect to informix services from usa and australia.

hdfc cuts housing loan rate to 13 per cent
mumbai: housing finance major, hdfc, today announced that it has reduced its retail prime lending rate by 0.25 per cent to 12.50 per cent and as a result housing loans up to rs 1 crore are now available at a floating rate of 12.5 per cent and at a fixed rate of 13 per cent. these rates will become applicable for all loans disbursed from may 8.

this rate cut comes close on the heels of the government increasing the tax exemption for interest on housing loans to rs 1 lakh. the lower rates coupled with higher exemption level means that a borrower who avails of a rs 750,000 15-year loan will get the full benefit of the exemption. earlier, a loan of rs 600,000 was enough for a borrower to exhaust the tax exemption limit. while the higher exemptions increase the borrower’s annual income by rs 8,000 (assuming a tax liability at 33 per cent), the lower interest rates reduce the equated monthly instalment. taken together both these would increase the eligibility limits for borrowers.

interest on loans for non-resident indians have also been reduced with loans up to five years available at 11.5 per cent and loans between 6-10 years at 12.5 per cent. floating rate loans for the same tenors are available at 11 per cent and 12 per cent, respectively.
the financial institutions however feels that going by what one can see in the horizon — the huge government borrowing programme and the drought — interest rates have bottomed out and are unlikely to go down further.

oil prices slip in asia
singapore: even as norway’s biggest labour dispute since 1986 threatened oil exports and us crude stocks fell, oil prices in asia slipped on thursday. the crude market, although not weakening by much, was consolidating after strong mid-week gains drew some profit-takers. oil companies operating onshore terminals in norway on wednesday said that about 1.1 million barrels-per-day (bpd), or a third of national oil exports, might be suspended because of a workers’ strike.

at around 0740 gmt, front-month june crude was traded at $26.60 a barrel, down 15 cents from its new york close and near the asian day’s low of $26.57. june crude had settled 14 cents lower in new york on wednesday at $26.75 per barrel, after prices had pushed as high as $27.39 earlier in the day.

crude prices rallied a dollar a barrel on tuesday, on the back of opec comments and sharp gains in the gasoline market. now in the absence of fresh bullish factors, traders said prices might continue to correct downwards.

the latest data from the us department of energy (doe) on wednesday showed us crude stocks fell 3.3 million barrels in the week ended april 28 – painting a less bullish picture than the american petroleum institute (api).

the oil cartel organisation of petroleum exporting countries (opec) had also lent some support earlier in the week by saying it was likely to cap its current oil supply when it next meets in june.

oil ministers from three leading opec producers have indicated that this was the best course of action given current market conditions, despite expectations that oil demand would start to rise in the third quarter.

opec members raised the cartel’s production ceiling in late march, sparking a downturn in prices. prices are now 20-25 percent lower than the nine-year peak of more than $34.00 a barrel in early march.

4 may 2000

final take: sinha repackages budget with large tax sops
new delhi: despite the initial harsh stance taken by the finance minister, mr. yashwant sinha, he announced a series of industry and market-friendly amendments on direct and indirect tax proposals while moving the finance bill 2000 for consideration in the lok sabha.

one of the key areas where there was tax relief, is the area of stock options. bowing to immense pressure from all sections of industry, the finance minister has finally conceded to tax esops not as perks but as one-time capital gains tax at the time of their sale. the other incentives finally given in the budget include, changes include a 10-year tax holiday for software exports from stps, providing tax-free status to venture capital funds, handsome sops for housing loans and doubling the rebate on investment in infrastructure bonds to rs 20,000.

in a bid to give impetus to exports, the finance minister announced that the cut-off for the 10-year tax holiday will continue until 2010 for units in stps and ftzs. this means units registering up to that point would be eligible for a tax holiday up to 2010, as compared to the originally planned date of march 31, 2000. this tax holiday has been extended to all r&d companies in knowledge-based industries, thus helping the pharmaceutical and biotechnology industries.

on the indirect taxes front, mr sinha’s focus has been on providing protection to domestic industry by hiking customs duty on a host of commodities like tea, coffee, poultry, meat and their preparations, marble slabs and tiles and non-coking coal.

however, the expected rollback on dividend tax and subsidies has not come, though.

the surcharge on non-corporate assesses having an income above rs 1,50,000 will continue at 15 per cent. but for purposes of tds, the surcharge would be 10 per cent to avoid operational complications. simultaneously, farmers have been exempt from tds on compulsory acquisition of land. charitable companies set up without any profit motive have been exempt from mat.

vysya bank gets ifc to take stake in it
bangalore: world bank affiliate, international finance corporation (ifc), which already has significant stakes in two other private sector banks in india, namely, centurion bank and global trust bank, has agreed in principle to take a 10 per cent stake in vysya bank at a price of rs 150 per share. parallely, bank brussels lambert (bbl) will also increase its stake by 2.50 per cent at rs 150 per share to maintain its holding at 20 per cent of the post-issue capital of the bank. the above two proposals will increase the bank's share capital from current rs 19.82 crore to rs 22.66 crore and would result in an inflow of rs 39.7 crore by way of share premium.

vysya bank meets the recently declared norms of reserve bank of india (rbi) for entering the insurance sector as a majority partner. with ing group being able to take only 26 per cent stake in the new insurance venture, vysya bank is expected to have a significant stake. a third partner may also be brought in due to rbi stipulations. as the third partner will have to be an indian company, market sources speculate that vysya bank might take a majority stake of around 50 per cent in the insurance venture.

3 may 2000

finance ministry may yield on taxation of esop
new delhi : the pressure being brought on it from all sides on the relaxation of the tax treatment on stock options, finally seems be bearing fruit. the finance ministry is on the verge of proposing that, stock options be taxed only for capital gains arising at the point of actual sale of shares by employees. apparently, a proposal to this effect has been forwarded to the law ministry for vetting.

currently, when the employee exercises the stock option, the difference between the offer price of the stock and the market value at the time of allotment is taxed as a perquisite. besides, any capital gains arising out of subsequent sale of this stock are also taxed.

the change -- withdrawal of the impost on perquisite at the time of exercising the option and only taxing any capital gains arising out of the sale of shares -- is likely to be incorporated in the amendments to the finance bill 2000, scheduled to be moved for passage in parliament on wednesday.

the software industry has been consistently lobbying for relaxation in the tax treatment on stock options saying that unless this is done, companies, which have a competitive edge, will be unable to retain their employees.

earlier on, tax authorities were considering alternative proposals, which included permitting deferment of the incidence of taxation arising at the time of allotment of shares by a stipulated period or allowing employees to meet their tax liability by staggering payments. however, none of the proposals of the revenue department cut ice with the ministry of information technology (mit) or the software industry.

premier economic institute predicts 6-7 per cent gdp
new delhi : the national council of applied economic research (ncaer), the country’s premier economic institute, has forecast the country's real gross domestic product (gdp) growth for the current fiscal to range between 6.4 and 7.2 per cent in view of the presence of ``both positive and potentially adverse factors that will affect the economy's performance in the year that has just commenced''.

in its latest review of the economy, conducted by the council's macro-monitoring & forecasting division, it said that on the positive side, the expectations of improved output and trade performance at the global level with expected moderation in crude oil prices provide some stability to the economy and its external balance. the overall inflation rate (reflecting the consumer price index) is projected to be about 4.5 to five per cent. the trade and current account deficits are projected at 2.5 and two per cent of gdp respectively.

on the negative side, the adverse risk factors are led by the vagaries of the monsoon since despite its declining share in gdp agriculture continues to affect the course of the economy significantly. the second factor that could stymie the fast pace in the manufacturing growth is the crucial infrastructure sector. the foremost among these is the power generation capacity, which would have to increase quickly to sustain the escalating demand for energy. it warned that slowdown in reforms in fiscal correction and power sector reforms could act as dampeners on investment climate.

the report also warned that continued large fiscal deficits on the part of the central and state governments, will affect the investment climate adversely directly by reducing government's ability to make investments in the infrastructure sector and indirectly by raising the cost of funds needed for private investment.

the economy has also witnessed emergence of ``new economy'' sectors. as the growing integration of indian markets with the global markets pose a greater challenge to both the policy-makers and the entrepreneurs, the council said that at the micro level, upgradation of technology, efficiency in production and marketing and high standards of quality would be the key to growth.

2 may 2000

after grindlays, it’s a public sector bank now for stanchart
it has just completed the largest bank acquisition in the asian region, but it’s clearly looking for more. in a report appearing in the economic times, standard chartered bank (stanchart) is said to have informed rbi governor, bimal jalan, that it would be keen on acquiring a public sector bank as and when regulations permit.

in his first media interaction after the grindlays takeover, mr. john filmeridis, general manager, middle east/south asia & ceo (india) at stanchart, said that the bank is looking to make "two and two equal to twenty-two and not four". mr. filmeridis also stated that stanchart’s acquisition of the grindlays business was driven largely by the australian bank’s attractive indian operations.

stanchart, which has received the go-ahead from the reserve bank of india (rbi), says that over the next two to three months, the two banks will go through a planning process, following which the integration process will begin. the implementation will follow after that. the bank will set up integration teams for every function and business at both the banks, to ensure smooth transition as a unified organisation. however, stanchart and anz grindlays will be run as separate entities at least for a year to overcome certain tax and regulatory issues. the entire integration process in the region is expected to take at least two years to complete. after this is complete, the bank will be called standard chartered grindlays, to take advantage of the brand equity the grindlays name commands in the region.

as already stated earlier, the acquisition has catapulted stanchart to the number one position among foreign banks in india, giving it a base of 1.65m retail customers and 1.1m corporate customers. the network also stands increased to 58 branches and though there is the possibility of a rationalisation, it might not ultimately happen.

1 may 2000

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