MUMBAI, June 23: Pertech Computers Ltd (PCL) has decided to hive off two key divisions to newly set-up subsidiaries and assigned an outside firm Webel Carbon & Metal Film Resistors the implementation of a computer manufacturing project.

The Rs 624-crore Dadan Bhai company will soon float a new software outfit, PCL Software Ltd, which will now 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 Ltd. 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 72 crore 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 26.33 crore raised for the computer project towards software export, citing favourable government policies on software export which had increased "exponentially" the scope and profitability in this field vis-a-vis computer manufacturing project".

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 their company's 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 businesses 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 shareholders' approval to grant absolute discretion to the board of directors to decide on the terms of the transfer and consideration for the same.

Although 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 if 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 the international markets, it said.

During the fiscal year to December 31, 1996, although the company clocked a sales turnover of Rs 603 crore registering growth of 40 per cent, profitability was under tremendous strain and net profit dipped to Rs 12.91 crore from Rs 22.40 crore in the previous year.

The company has decided not to pay any dividend this year, while it had paid 25 per cent dividend in the previous financial year.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.