Nbfcs Get A Break

The RBI has announced several concessions in the norms for non-banking finance companies (NBFCs). The central bank decided to back-track within just a month of issuing the original norms, due to widespread opposition from the industry. Now, NBFCs with a minimum investment grade of A-, BBB, BBB- can accept public deposits; earlier, those rated below A could not. Unrated NBFCs are still banned from accepting fresh deposits, but they will be allowed to renew maturing public deposits.

NBFCs now have till December 31, 2000 to regularise their excess deposits; this is an extension of two years on the earlier deadline of December 31, 1998. The RBI has ordered that the regularisation be equally divided over all three years, however. Additionally, the classification of net owned funds has been widened to include preference shares that are converted to equity. This is important because the ceiling on public deposits is given as a multiple of the value of net owned funds. AAA-rated NBFCs can now raise public deposits up to four times their NOF (earlier it was three times); AA- rated firms up to 2.5 times, A-rated firms up to 1.5 times and minimum investment grade firms, up to 0.5 times the NOF.

Glaxos new pill for dominance

The British pharmaceutical giants, Glaxo Wellcome and SmithKline Beecham, have announced their plans to merge. The new group, with a combined market value of over $163 billion, would become the biggest drug company in the world. The mammoth combine would corner more than 7 per cent of the world prescription drug market (based on 1996 figures), with total sales of $20 billion. This would leave the current prescription drug leaders trailing far behind Merck at $13 billion and Novartis at $10 billion.

In India, the merger will involve four main companies the Rs 645-crore Glaxo, the Rs 184-crore Burroughs Wellcome, the Rs 202-crore SKB Pharma and the Rs 497-crore SKB Consumer Healthcare. The combined turnover (taking last years figures) will total over Rs 1,500 crore. On news of the merger, SKB and Glaxo scrips shot up on the bourses.

Tables turn for ANZ and NHB

A new twist has emerged in the 1992 securities scam case, involving ANZ Grindlays and the National Housing Bank (NHB). The Special Court judge, Justice S N Variava has ruled that ANZ will have to pay Rs 1,048 crore to NHB within a period of 21 days. This overturns the earlier ruling in March 1997 by a specially appointed arbitration panel that NHB pay Rs 912 crore to ANZ.

All the fuss started in 1992, when the securities scam came to light. NHB had issued nine account payee cheques worth Rs 506.54 crore to ANZ Grindlays. These were reportedly handed to Harshad Mehta, who deposited them in his ANZ account. According to Variava, ANZ was not justified in crediting these cheques to Mehta the court has rejected the banks claim that it acted in good faith and without negligence. Variava has struck down the earlier arbitration committees award in favour of ANZ, claiming it was based on the norms of criminal law, rather than civil law. However, ANZ is not willing to give up without putting up a fight the company will appeal to the Supreme Court, according to CEO John Macfarlane.

GM holds Daewoos hands

The American General Motors and South Korean Daewoo Motor have announced a strategic alliance. The two auto majors will discuss collaboration on the production and sale of cars in markets across the world; GM is reportedly bidding for a 50 per cent stake in Daewoo Motor as well.

In India, the tie-up is estimated to take at least 40 per cent of the mid-size car segment, according to 1997 figures this is the combined sales percentage of Daewoos Cielo and GMs Opel Astra. The global alliance would be beneficial in India since GM would cater to the high end while Daewoo could focus on the low end. If GM acquires stake in the Korean Daewoo Motor, it will not affect the Indian subsidiarys shareholding, but may alter their launch plans. Daewoo India is a direct subsidiary of Daewoo Corporation (which has a 92 per cent stake in the venture), rather than Daewoo Motor but the second company controls the technology supply to India.

Birla Trust for politicians

The Aditya Birla Group has announced the setting up of a trust to fund the election expenses of political parties and individuals involved in politics. The distribution of funding will depend on the location of the Birla companies that contribute to the trust. The trust will be supervised by an advisory board headed by P N Bhagwati, the former Supreme Court chief justice. There will be a board of trustees to administer the disbursal of funds the three trustees appointed so far are retired police officer Julio Ribeiro, former Exim Bank CEO Tarjani Vakil and the eminent lawyer EB Desai. The move makes the Birlas the second corporate group to set up such a fund. The Tatas had set up an electoral trust last year, but that has no advisory board and does not fund individuals.

BZWs final farewell

BZW, the investment banking arm of Barclays, is no more. The Indian operations of BZW finally wound up, following the parent companys decision to pull out of the securities and investment banking business. The new 100 per cent subsidiary of Barclays in India is Barclays Capital. Internationally, the new entity has been awarded an AA rating and will have access to $350 billion in Barclays Bank assets. It will handle debt, lending and risk management instruments. The 90-strong BZW staff in India will be trimmed by about a quarter the equity research staff will be dismissed, while the rest will be employed in the new Barclays Capital with Ajay Sondhi as the managing director. BZWs exit from India makes it the third investment bank to shut shop here NatWest Markets and Deutsche Morgan Grenfell were the first two.

MUL, Suzuki talk terms

Maruti Udyog Ltd and the Suzuki Motor Corporation have finally agreed on the terms for the payment of royalties, and technology transfer from the Japanese partner. The board of directors of MUL accepted the existing royalty agreement with Suzuki, formulated in 1994. MUL must now seek ratification from the Ministry of Industry; then MUL can resume royalty payments to the Japanese company for the Maruti 800 and Omni models. These have been pending since April 1997, due to the non-renewal of the original royalty agreement by the MUL board last year. In return, the SMC has submitted a report to MUL on the continued transfer of automotive technology, particularly for gearboxes.

Kirloskars trimming flab

The century-old Kirloskar group has announced dramatic restructuring plans for its Rs 2,400 crore corporate empire. Over the next year, the Kirloskars will cut the number of group companies by almost half, exiting from non-core areas. At the same time they will look for strategic acquisitions in their core areas. At present, the 35-odd member companies span machinery manufacture, software development, pollution control equipment, advertising and communication, hire purchase, leasing, property development, merchant banking, project consultancy, market research and the hospitality industry.

In the new scenario, the group will focus on its core competencies of machinery manufacture and metal foundry engineering, while divesting in unrelated businesses. The move is aimed at achieving eight to ten per cent profitability by the next century. Although the Rs 2,400-crore Kirloskar group ranks among

Indias top twnety corporate houses in terms of turnover, its ranking in terms of profits is dismal at present.

Videocon ventures out

Videocon International is living up to its name. The company has submitted formal applications to the governments of Vietnam and Indonesia to start wholly-owned subsidiaries in both countries. Similar plans are being made for projects in Bahrain and South Africa. Videocon aims to manufacture and market television sets, washing machines and refrigerators through these subsidiaries. The consumer electronics major is eyeing a turnover of Rs 2,000 crore from the new ventures over the next four years; it is optimistic about gaining a 10 per cent share in the respective overseas markets.