Mumbai, Feb 27: GE of the US, the world's largest electricals group, has decided to buy out the low voltage equipment business of GEC Alsthom India for an undisclosed sum.GEC Alsthom has deployed Arthur Andersen & Associates to value the assets of the low-voltage transformer division. The division was part of GEC Alsthom's transformers and reactors division, which contributed Rs 80.3 crore to the total GEC Alsthom turnover of Rs 532 crore in 1996-97.
In another development, Saroj Poddar, Calcutta-based industrialist, took charge on Friday as the chairman of GEC Alsthom India, replacing Ramesh K Daga, who was chairman and managing director of this company.
"It is true that GEC Alsthom India has negotiated a sale of its low voltage equipment division to GE of the US," said Poddar to The Financial Express on Friday. Poddar also confirmed his taking over as chairman of GEC Alsthom India. A GE spokesperson said, "as policy GE never comments on plans that have not been announced publicly." GE thuscontinues to emerge as the busiest buyer of Indian industrial assets.
GE first tied up with Apar for lighting, and is believed to be set to buy them out. It has tied up with Godrej for white goods. It bought SRF Finance, and has sold out controlling stake already in that company to a Singapore-based foreign institutional investor. GE of the US has directly invested in the Dabhol Power Corporation project led by Enron, where it has picked up 10 per cent along with engineering, procurement and construction contractor Bechtel.
The GEC Alsthom deal is more interesting because the engineering company is a subsidiary of GEC Alsthom of the UK, which makes for a rare case of a multinational buying out low-performing Indian assets of another multinational. The performance of the low voltage equipment group of GEC Alsthom India was severely affected during 1996-97 due to the liquidity crunch that affected the entire economy. The consequent slowdown was also responsible for postponement of several key industrialprojects that would have provided substantial market for the division. The group's export performance was, however, good during the year.
INSIGHT
Poor margins were a drag
GEC Alsthom's distribution transformer division had a poor order book and margins were also low. During 1996-97, all medium and low transformer players except Emco Transformers have performed poorly.
The major buyer was Rural Electrification Board which operates on a tender system. This ensures very stiff competition on price.
The company had manufactured 400 kv transformers in India but demand obviouly wasn't there. GEC was mainly into low and medium-scale transformers.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
