CALCUTTA, Mar 19: GEC Alsthom India Ltd, the manufacturer of industrial, power transmission and distribution equipment, has finalised a price of Rs 75 crore for the sale of two divisions to GE Electrical Distribution & Control India Ltd, the subsidiary of General Electric Co of the US. Apart from the low-voltage equipment business, the company is also selling its engineering plastics business at Pondicherry to the GE subsidiary.Arthur Anderson & Associates, appointed by the company to value the business, had suggested a price between Rs 70.2 crore and Rs 75.8 crore.Employees in these two divisions will be transferred to the new management on their present terms and conditions.
It is understood that GEC Alsthom has completed the Indian part of the due-diligence exercise being undertaken worldwide following the decision by Anglo-French combine GEC Alsthom - a 50:50 partnership between General Electric Co of the UK and Alcatel Alsthom of France - to become a public company. The due-diligence exercise wasundertaken to focus on core competencies and restructure business operations.
At the extraordinary general meeting called on April 14 in Calcutta by GEC Alsthom India, the company will seek the clearance of its shareholders for the appointment of V F Banaji as a director, the sale of the two divisions and the appointment of K K Moradian as the new managing director. There is likely to be another meeting before the annual general meeting for approving the new name of the company, likely to be Alsthom India Ltd.
GEC Alsthom, in its EGM notice to shareholders, says that the French parent GEC Alsthom NV - which has a 67 per cent stake in it - has decided to exit from the low-voltage business worldwide and stick to its core business. Following the sale, the notice says, "The technology for developing and introducing such new range of products in low voltage applications... will not be available within the GEC Alsthom group".
"The directors feel that in the given circumstances, it would not be prudent tocontinue with this business as it could, after sometime, become a drag on the company's overall profitability and growth," the notice adds.
GE of the US is interested in taking over both the divisions as going concerns, the notice says, and GEC Alsthom's board "has agreed that an overall consideration of not less than Rs 750 million be received against this transfer (for both tangible and intangible assets)".
The two divisions together have been reporting declining sales -- from Rs 88 crore in 1995-96 to Rs 85.1 crore in 1996-97 and finally to around Rs 72.7 crore in 1997-98. Their market share has also decreased, from 28 per cent to 25 per cent in the same period.
Sources said the sales of these divisions -- accounting for 13.8 per cent of the Rs 525 crore turnover reported by the company for 1996-97 -- will no longer accrue to GEC Alsthom from 1998-99.
GEC Alsthom had sold a 51 per cent stake in its furnace division to the Indian subsidiary of Italy's GA Danieli on November 1, 1996. It had alsosought its shareholders' approval for transferring its energy meters business to a wholly-owned subsidiary for inducting fresh technology. But, according to the 1996-97 annual report, the transfer did not materialise and the company is still looking for new technology. Banaji will come on the board as a wholetime director for three years beginning March 1, 1998, with the designation of executive director in charge of human resources.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
