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June 26, 1997


Pertech to float two subsidiaries

After the shock of a disastrous financial year, Pertech Computers Limited has begun to get its act together. The company now plans to make its two divisions into subsidiaries and get an outside company to manage the manufacturing business.

PCL has assigned Webel Carbon and Metal Film Resistors the implementation of a computer manufacturing project.

The Rs 6.24-billion company, run by industry veteran Dadan Bhai, will soon float a new software outfit, PCL Software Limited, which will independently handle the entire operations of the software export division.

The activities of the solution provider division will be transferred to another wholly-owned subsidiary, PCL Systems Limited.

The restructuring exercise will, in effect, transform PCL into a marketing outfit, as it will be primarily involved in distribution and marketing functions.

PCL had raised Rs 720 million through an equity offering in August 1994 to part-finance the software export project and a computer manufacturing plant.

But the company later decided to re-route Rs 263.3 million raised for the computer project towards software export, citing favourable government policies on software export.

PCL will now seek retrospective approval from the shareholders for re-routing investments earmarked for development of a computer manufacturing facility towards the software export project.

The implementation of the computer manufacturing project will now be assigned to Webel Carbon - an electronic component manufacturer in which PCL has picked up 30 per cent equity.

PCL shareholders had approved investments in Webel Carbon at their last annual general meeting.

According to PCL, The proposed restructuring has been necessitated to counter competition in the domestic computer industry and make the firm globally competitive.

"The need is felt to focus and channelise the skills and expertise on distinct business and ensure strengthening of existing capacities as also to invest in the future by expanding capacities in the existing areas," the company has stated.

PCL will seek the mandate of the shareholders to effect the organisational restructuring at its AGM in Calcutta later this week.

The company will also seek the shareholder's approval to grant absolute discretion to the board of directors to decide on the terms of the transfer and consideration for the same.

Though the company has justified the transfer, claiming that the software export and solution provider operations represent 'distinct areas in terms of level of technology advancement, economies of scale, clientele, quality, response time and degree of competitiveness', the reshuffle may adversely affect shareholders as the hive-off will eat into the turnover and profits of the holding company.

The company, however, feels otherwise. "The transfer is expected to give more synergy, competitiveness and hence more profitability to these operations," the PCL annual report states.

Meanwhile, the "assignment" of the computer manufacturing unit to Webel Carbon will "result in better economy and will bring about a better structure for raising funds both from India and abroad," PCL said.

The re-arrangement will improve the profitability of the project and help integration with international markets, it said.

- Compiled from the Indian media

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