Finmin awaits law ministry advice on SBI-SBS merger

The board of SBI and State Bank of Saurashtra had already given their nod for the proposed merger in August last year despite opposition from a section of bank employees.The proposed merger would be the first of its kind among public sector banks.The finance ministry has sought the law ministry’s advice on the merger which is yet to come. Once the advice comes, the proposal would go to the Cabinet for approval

Speaking on the merger, SBI chairman OP Bhat had earlier said “other formalities regarding the merger have been completed and only the government approval remains.” Since State Bank of Saurashtra was a 100% subsidiary of SBI, the merger was only a technical process, he had said.

SBI also convened a meeting to consider merger proposal with other associate banks in January but was postponed later following opposition from the unions.

Govt refuses to bail out MFL

In a major setback to the government’s programme to restructure ailing PSUs, the finance ministry has rejected a proposal to give financial assistance to revive Madras Fertilizer (MFL). MFL is one of several PSUs seeking funds from the government.

In the case of MFL, the finance ministry’s stand could mean virtual closure of the company that has been reeling under severe losses for the past few years. The restructuring package for the company was finalised by department of fertiliser (DoF) and sent to the Cabinet Committee on Economic Affairs (CCEA) for approval.

MFL has got accumulated losses of Rs 513.7 crore which may go up to Rs 665.57 crore by the end of the fiscal 2007-08. The paid-up capital of the company is Rs 161 crore.

Read more in The Economic Times article.

Uco Bank plans Rs 250 cr issue

Public sector Uco Bank is planning a follow-on public offer (FPO) of shares to raise Rs 200-250 crore in the first half of the calendar year 2008 to fund asset expansion.
“The bank also has plans to raise Rs 200 crore in tier-II bonds by March-end 2008,” Uco Bank Chairman and Managing Director S K Goel said today.

Uco Bank has submitted a capital restructuring plan to the government. It has suggested for a conversion of Rs 300 crore worth equity shares into preference shares and the bank expects to get the government’s nod in 45 days. At the moment, the bank has a paid-up capital of Rs 800 crore.

The share sale would dilute the government’s holding to 55 per cent from the present 75 per cent.

Read more in The Business Standard article.

Cabinet nod to Mittal stake buy in HPCL unit

Hindustan Petroleum Corporation shares were up 4.20 per cent at Rs 274 on the BSE, after the Cabinet Committee on Economic Affairs approved the proposal allowing steel baron Lakshmi Mittal to pick up 49 per cent stake in the state-run oil refiner’s Bhatinda unit.

The petroleum ministry had approached the Cabinet panel for project-specific approval to Mittal Investments Sarl for the stake sale as currently foreign direct investment in petroleum refineries of public sector units is allowed only up to 26%.

The current policy also restricts PSU holding to 26% in such projects and makes it mandatory for the balance 48% to be offered to public. END

AI to raise $1.5 bn for aircraft

National carrier Air India, which has placed a $9 billion order to acquire 68 Boeing family aircraft, is planning to raise over $1.5 billion to fund part of its acquisition programme.

The PSU airline is also planning to adopt innovative borrowing structures, including sale and leaseback programmes, which are popular aircraft financing methods for private domestic airlines.

Air India has already floated enquiries calling for bids from banks and financial institutions for the second round of aircraft deliveries beyond December 2007 up till March 2009, and also pre-delivery payments (PDP) for aircraft and spare engines to be delivered during 2008-09.

The airline will have to pay 15 per cent of the total agreed amount as advance in the form of PDP and 85 per cent as delivery financing.

Read more in
The Business Standard article.

Govt plans stake sale, IPO in Oil India

The Indian government plans to sell 10 per cent of its holding in Oil India Ltd, when the state-owned exploration firm launches an initial public offering of new shares, an oil ministry official said on Friday.

"We had sent a cabinet note for 10 per cent initial public offer, but the finance ministry has also recommended 10 percent disinvestment with the IPO," the official, who did not wish to be identified, told Reuters. He said a decision was yet to be taken about the sale and when to make the offering.

PSUs likely to invest in MFs

The Cabinet Committee on Economic Affairs (CCEA) will discuss the proposal to lift the ban on state-owned companies from investing in mutual funds in its weekly meeting tomorrow.

This opens significant opportunities for cash-rich public sector units (PSUs) to earn higher returns and provide a fillip to the stock-markets. Mutual funds account for less than 1 per cent of total stock market investment.

According to data compiled by the Business Standard Research Bureau, the 78 listed public sector units had reserves worth Rs 3,04,292 crore at the end of March, 2006. Oil and Natural Gas Corporation (ONGC) with reserves of Rs 52,534 crore topped the list.

This is the second recent move by the government to strengthen PSUs. A month ago, it allowed the chairmen of such companies a role in the appointment of independent directors, also allowing them greater flexibility to make investment and operational decisions.

Read more in The Business Standard article.