7 september 2000

vsnl gains rs 700-cr compensation for losing monopoly
new delhi: the union cabinet has finally decided to end the monopoly of videsh sanchar nigam limited (vsnl) in international voice telephony. the cabinet has approved that private players will be allowed in this arena from april 1, 2002, two years ahead of schedule. it has also decided that vsnl will be compensated with a rs 700-crore package, for this early truncation of its monopoly.

as part of the compensation package, the state-owned company has been allowed to enter the national long-distance service without paying the required license fee of rs. 100 crore. also waived is the condition of revenue sharing with the government. vsnl has been exempted from sharing any revenues for the first five years.

the government has appointed salomon brothers to evaluate the compensation package. if the evaluation states that the compensation is not enough, the government may be ready to share part of the revenue earned from private international operators.

rbi allows top nbfcs to become banks
mumbai: in a major move, the reserve bank of india is set to allow select top non-banking finance companies to convert themselves into banks. such companies will be required to put in applications in accordance with the new bank licensing norms, which are likely to be out over the next few days, unlike financial institutions, which could convert themselves into banks directly by moving the rbi.

the finance ministry is said to have approved the proposal and it will be part of the new bank licensing norms. the original licensing norms for the new banks did allow nbfcs to float banks. the new policy will allow nbfcs to convert themselves into banks provided they fulfil the very stiff criterion.

among other things, the rbi will look at track records, asset base and capital adequacy ratio, besides other financial parameters. any default in repayment of public deposits by an nbfc will rule out the possibility of its converting itself into a bank.

thanks to these stringent conditions, only a handful of nbfcs are expected to be eligible to convert themselves into banks.

ifci begins first steps towards restructuring
calcutta: financial institution, ifci, which has to contend with the report on its operations by an expert committee headed by former managing director of state bank of india, mr. basu, has taken a few steps towards restructuring itself. these steps are ahead of the basu committee’s report on the institution’s strategy and repositioning.

the expert committee will advise the institution on the role that ifci can play in the emerging economic and financial scenario, especially with respect to products and segments with which it can reposition itself.

the management of the institution has begun taking some major steps to improve ifci's financials and make its portfolio healthier. first among the steps is a request to the government for an additional rs 400 crore by way of additional preference share capital, augmenting share capital through a rights issue and considering kfw funds, earlier treated as grant, as tier i capital.

ifci has also decided to use outside experts for diagnostic studies of corporates facing problems and providing solutions for corporate restructuring. recovery will also be stepped up through the debt-recovery tribunals and by enforcing security. it will also focus on monitoring of projects during implementation and thereafter on an ongoing basis. it will also move to settle default cases with government guarantee to improve profitability.

citigroup to buy associates first for $31.1billion
new york: citigroup, the biggest financial company in the us with $791 billion in assets and $51 billion in equity, is buying the largest listed us finance company, associates first capital, for $31.1billion in stock.

the dallas-based associates first capital has $100 billion in assets and $10 billion in equity and the takeover should propel citigroup to a market capitalisation of around $275 billion.

this is the first big acquisition citigroup is making after mr. sandy weill took control of the us giant, after mr. john reed's retirement as chairman and co-chief executive.

citigroup now looks more like a finance company than a bank when it comes to consumer financial services, particularly in the us. while many traditional banking businesses are suffering from narrowing profit margins, lending to non-bank consumers offers greater prospects.

in buying associates, citigroup is paying about 50 per cent more than their closing price on tuesday. but because citigroup has a higher price-earning ratio, the deal is expected to add to its earnings despite the hefty premium.

6 september 2000

icai to make eps accounting norm mandatory
mumbai: the country’s apex accounting body, the institute of chartered accountants of india (icai) is to soon come out with mandatory accounting norms on earnings per share applicable for accounting periods commencing on or after april 1, 2001. the norms will be applicable to all enterprises, irrespective of whether or not their equity shares or potential equity shares are publicly traded.

the institute has just released an exposure draft which proposes that an enterprise should present basic and diluted eps for each class of equity shares that has a different right to share in the net profit for the period.

the proposal, which is based on the international accounting standard, further proposes that where the profit-and-loss account includes extraordinary items, the enterprise should disclose two basic and diluted eps figures, one which includes the extraordinary item and another wherein the impact of such extraordinary item has been excluded.

it is hoped that, by making this mandatory, it will make it easier for analysts and investors to make comparisons of performance among different enterprises for the same period, and among different accounting periods for the same enterprise.

the exposure draft also takes into account the issue of bonus or right shares, buyback of shares, stock options, etc. which may necessitate proper calculation of eps and provides illustrations that highlight these issues in the calculation of the eps.

5 september 2000

finally, new products from lic
calcutta: in view of the threat to its business from private players, the country’s largest and monopoly life insurance player, the life insurance corporation, is planning to launch a few new products by the end of november this year to cater to various segment of customers. it will also, simultaneously, withdraw or restructure some of the products, which are not doing too well in the market.

the corporation had envisaged four to five new products, including one exclusively for ladies, and was planning to launch these new schemes by the end of the year.

oil prices touch 10-year high
london: as the meeting of the apex oil controlling body, organisation of petroleum exporting countries, failed to halt the turmoil in the markets, the price of oil jumped to a ten-year high. in the london futures market, contracts for brent blend finished at $32.80 a barrel, a gain of 95 cents on the day and its highest close since 1990, when prices were buoyed by iraq's aggression towards kuwait.

another crucial opec meeting is to begin in vienna on sunday, where saudi arabia is likely to press other members of the cartel to agree an increase in crude output. saudi arabia, the world's leading oil producer, has been under increasing pressure from the us and other oil consumers, to engineer lower crude prices.

however analysts said that any rise in production agreed by opec could be too late to prevent shortages later in the year. oil prices have been rising in recent months because of evidence that the stockpiles of oil in the us, the world's largest consumer of the commodity, are at their lowest for more than 20 years.

analysts also state that opec is not releasing enough oil to meet global demand. they say that even if opec changed its policy at the vienna meeting, the cartel would fail to prevent a shortage of supplies during the northern hemisphere's winter.

refineries owned by large oil companies have been reluctant to add to stocks while the futures markets traders have been betting that oil prices will be lower in the future than they are today.

the worry is that such a reversal in sentiment might require a shock that could just as easily send prices tumbling out of control rather than stabilise them.

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