The two companies have agreed, in principle, to try and set up a joint venture to manufacture rail coaches. Bharat Earth is already manufacturing rail coaches at its Kolar unit. In recent years, however, orders from the Indian Railways have dwindled considerably, forcing the company to look at exports.

Bharat Earth CMD K Apramayen said that while the joint-venture plan is still at the drawing-board stage, both companies have agreed to jointly bid for any metro or light-rail transport system, including the elevated light-railway transport system proposed for Bangalore.

He further said that the two are yet to reach on an agreement despite years of deliberation. Alstom had earlier agreed to commission the feasibility study to an international consultant but laterdecided to conduct an in-house study. Alstom plans to forward its recommendations to the board in Paris and then hold further talks with Bharat Earth.

The company, on its part, has put three conditions before it hives off its railway division into a separate firm. First, it wants Alstom to secure a market for electric-rail coaches, which are presently being manufactured at its Kolar unit. Second, it has asked Alstom to minimise manpower retrenchment and, finally, it wants the French company to bring in state-of-the-art technology.

Alstom is the world leader in electric rail-coach technology and any joint venture with them cannot be complete without the latest technology, Aprameyan said. Moreover, the joint venture has to operate on such a technology to tap the export potential, he added. The company's sales were consistently lagging behind turnover over the previous two years and the inventory was increasing interest costs. Apart from the slowdown in orders from railways and Coal India, Bharat Earth hasalso suffered from a recession in the construction sector. The company recently received a large order from the railways for the manufacture of AC and DC electric multiple units for Mumbai, Calcutta and Chennai. The company registered a decline in net profits from Rs 18.16 crore during 1996-97 to Rs 10 crore during 1997-98.

According to Aprameyan, this was on account of a sluggishness in the infrastructure sector.

Moreover, the company is expanding its operations in different sectors which is being reflected in an increased turnover but lower profits. Net sales increased to Rs 1268.53 crore from the previous year's Rs 1169.79 crore. Total expenditure increased to Rs 1145.55 crore, from Rs 1025.54 crore last year.