8 july 20000

hindujas, bajaj auto and s kumars in line to join insurance bandwagon
mumbai: with the insurance regulatory and development authority (irda) only weeks away from accepting the first applications from prospective promoters for the insurance business, more private companies are joining the bandwagon.

the hinduja group is venturing into all three forms of insurance -- life, general and re-insurance. the group is said to be in the process of wrapping up deals with two-three different collaborators specialising in each of the three sectors. it is expected that the foreign partners, indusind bank ltd, the bank promoted by the group, will hold up to 20 per cent stake and the balance will be held by the group, subject the rbi guidelines.

cash-rich bajaj auto is said to be planning to enter the non-life insurance sector through a possible tieup with a foreign partner. although, bajaj auto has enough funds to set up an insurance company on its own and meet the growing capital requirements, it will require a foreign partner for the expertise. it is not yet clear whether the firm has decided on offering an equity stake to the foreign partner.

textile company, s kumars, which has recently entered into the internet arena, is looking at a three-way partnership and is reported to be in talks with jammu and kashmir bank as the second partner with a foreign insurance firm joining as the third partner.

almost all companies who have announced their intentions to get into insurance business have announced a tie-up or an intention to tie up with a foreign partner. the only exclusions to this are the reliance group (non-life and life insurance ) and kotak mahindra financial consultants (non-life insurance business). both these companies plan to set up 100 per cent subsidiaries.

among the prospective entrants, interest is keener in the life insurance segment as this is the business which has been driving premium growth world-wide. industry watchers expect a dozen players in life and a half of that in non-life when licences are finally issued.

stanchart-grindlays merger encounters new twist
mumbai: the complicated merger between standard chartered bank and grindlays, has taken a new twist with the national housing bank (nhb) filing a petition in the supreme court asking for the rs 907 crore it had paid to anz grindlays following an arbitration award in 1997.

according to the national housing bank, since post-acquisition grindlays will cease to exist in india, it should pay up the money now. the petition will come up for hearing when the apex court opens after the summer vacation.

the amount became a bone of contention between the two financial institutions, after the harshad mehta scam broke out in 1992. currently an appeal lies in the supreme court against a verdict passed by the arbitration bench awarding grindlays’ the right to get the stated amount from nhb. grindlays’ had, however, given an undertaking that in case the supreme court judgment goes in favour of the nhb, it will return the money along with 18 per cent annual interest. the indian subsidiary of anz banking group has already repatriated the money to the parent.

7 july 2000

call stays in range, as securities decline
mumbai: inter-bank money market rates stayed within the seven per cent range, while security prices took a hit due to the volatility in the foreign exchange markets. overnight rates ruled around seven per cent as easy liquidity conditions continued.

call rates are expected to stay at the current levels for today also. while the central bank did not receive any bids for its repo or reverse repo auctions, the prices of government securities fell due to the volatility in the foreign exchange market by five paise in the short-end and up to 12 paise in the medium-to- long-term maturities.

the expected lull in forex market would keep most bankers on the sidelines. the market continues to anticipate rbi to announce an auction following the rs 3,000-crore private placement of the 11-year security. most expect the bond auction to be announced for the longer tenor of above 10 years.

6 july 2000

standard life pays record price for hdfc mutual fund
mumbai; in what is a record-setting deal for any mutual fund, standard life of the uk has paid rs 50 crore to housing development and finance corporation (hdfc) as an advance towards exercise of its option to buy up to 26 per cent stake in hdfc asset management company. the company is yet to receive a single rupee in terms of assets under management. hdfc currently holds 100 per cent of the rs 20 crore paid-up equity capital of the amc.

the option given to standard life investments, the investment arm of standard life assurance company, is exercisable within one year of the mutual fund launching its operations. the valuation of the stake will be decided at the time of exercise of the option and fipb approval too will be sought then.

hdfc, which has received all approvals to set up a mutual fund venture, is all set to float its three maiden schemes by the end of this month.

hdfc is planning to utilise its 46,000-strong fixed deposit agent network, its 72 branch offices and the 119-strong branch network of hdfc bank to market the mutual funds schemes. the company has already held 37 workshops nationally between march and may this year for its top performing fixed deposit agents to educate them about the concept of mutual funds.

hdfc amc plans to launch three schemes: an income fund, a balanced fund and an equity fund in the last week of july, and is aiming to mop up rs 400 crore through these schemes.

disinvestment ministry moots strategic sale of 32.61 per cent stake in hoc
new delhi: according to a report in the business standard, the department of disinvestment has proposed the sale of 32.61 per cent government stake in hindustan organic chemicals ltd. (hoc) to a strategic partner along with the transfer of management control. the proposal calls for the government to retain a 26 per cent holding in the company, following the sale. the government, currently, holds 58.61 per cent equity in the company after it recently divested 20 per cent stake in favour of mutual funds and the uti.

the proposal is soon to be considered by the core group of secretaries on disinvestment, after which it will be referred to the cabinet committee on disinvestment for ratification. the cabinet committee had, in its last meeting, accorded an "in principle" approval for the sale of government equity in hoc and had asked the department to come up with a specific proposal.

the disinvestment commission had classified hoc as a non-core company and said that the strategic sale would enable it to acquire new technologies and funds necessary for expansion.

hoc was set up in 1960 to manufacture chemicals for dyes and dye intermediates, drugs and pharmaceuticals, rubber, chemicals, laminates and solvent industries. the company has two units, one at rasayani in maharashtra and the other at kochi, kerala. hoc also has a wholly-owned subsidiary, hindustan fluorocarbons ltd., at hyderabad.

5 july 2000

scam arbitration award may hit grindlays-stanchart merger
mumbai: in a move that may put a spoke in the stanchart-grindlays merger, the reserve bank of india has demanded comfort letter from standard chartered bank on honouring the anz grindlay’s undertaking given to court on the rs 907-crore arbitration award against national housing bank. this letter is being sought as a precondition to clearing the stanchart’s acquisition of gindlays operations in india.

although stanchart has assured rbi that post acquisition, the two entities will continue to function for at least a year and no decision will be taken in regard to the staff without the central bank’s nod, the rbi has asked for the blueprint for the staff redeployment policy post acquisition.

stanchart, which needs the clearance of close to a dozen central banks on its $1.3 billion acquisition of grindlays business in west asia and south asia, may find the central banks of bangladesh, sri lanka and nepal unwilling to give the green signal till the indian central bank clears the deal.

according to sources, rbi is acting cautious on the hrd front and it does not want to be dragged into any litigation. stanchart trade unions in madras have made the rbi a party to a case challenging the voluntary retirement scheme introduced by the bank a year ago.

4 july 2000

government to allow allotment of shares in lieu of cash to foreign companies
new delhi: departing from its earlier stand that ruled for many years, the government is said to be allowing the induction of foreign equity in indian joint ventures in the form of man-years of work done by the foreign company for the joint venture. this would mean that indian companies would now be able to allot shares to their foreign partners for the services rendered by the partners for the joint venture.

till now, the government had permitted the adjustment of foreign equity against technical knowhow, royalty and capital goods but this would be the first time when business granted would be considered in lieu of foreign capital.

the landmark decision has been taken in the case of jason geosystems bv of the netherlands, which is to get the equivalent of 90 man years of work in its joint venture, itti, in india. this would constitute a 6.9 per cent of the total paid-up capital of the company at a price of rs. 114 per share.

itti is bringing in jason geosystems to carry on the business of development of software for use in various areas of activities, such as finance, financial services, manufacturing, distribution and transportation.

while the fipb which approved the application was of the view that the mode of payment was a matter to be settled between the partners, the department of economic affairs had strongly opposed the move and recommended that such an induction should be rejected, or least the opinion of sebi and rbi should be sought in the matter.

stanchart said to be bidding for hong kong business of chase manhattan
london: soon after spending nearly $1.3 billion to acquire the grindlays banking operations from the anz group, standard chartered, now india’s largest foreign bank, is said to be in a billion dollar bidding war to buy chase manhattan’s retail banking business in hong kong. the british bank, which aims be a powerful player in asia and the emerging markets, has bid around $1.6 billion to buy chase’s hong kong branch network and its mortgage, consumer credit and personal loan businesses. stanchart is already the second biggest bank in hong kong and hopes to become even bigger with this prospective acquisition.

stanchart joins four other powerful rivals including citibank, singapore development bank, hong kong’s bank of east asia and the singapore overseas bank, in the bidding process.

to fund its buying spree, stanchart has raised more than 600 million from the international capital markets in recent months. it is also hoping to bolster its cash pile by selling a british-based subsidiary company chartered trust for around 600 million.

chartered trust, a profit making concern, is the group’s british consumer finance and contract hire business. however, stanchart chief executive, mr. rana talwar, is of the opinion that it is peripheral to the bank’s main interests in asia and the emerging markets.

go to finance diary index page