The move is in line with Godrej & Boyce's strategic decision to focus on its core businesses that would enable the group to strengthen the Godrej brand, a press release stated.

Godrej Pacific Tech is the market leader in IT distribution in India with sales exceeding Rs 728 crore in 1998-99.

According to Godrej & Boyce managing director Jamshyd Godrej: "This transaction was inevitable as a result of the group's restructuring efforts that will allow us to focus on our core businesses that can help enhance the Godrej brand."

The transaction will allow Tech Pacific to expand its presence in the fast growing Indian infotech market. On completion of this transaction, Godrej Pacific Tech will become a wholly-owned subsidiary of Tech Pacific, said the press note.

While no details were mentioned on the financial aspect of the deal, the release said: "The partnership between Godrej & Boyce and Tech Pacific has worked well for the mutual benefit of both partners over the last four years."

Godrej & Boyce's board nominees have stepped down. Shailendra Gupta will be appointed managing director of the company with immediate effect in place of Manu Parpia. The operating management structure, however, remains unchanged.

The divestment comes as a reprieve to the privately-held Godrej & Boyce which has to raise over Rs 178 crore for funding recent restructuring announced by the group. However, given the small equity of Godrej Pacific Tech (around Rs 14 crore), the realisation will not be huge, analysts point out. Industry observers say that the company will have to consider other measures to raise funds.

Godrej & Boyce has to raise a minimum of Rs 48 crore for buying out GE's 40 per cent stake in Godrej GE Appliances. In addition, the company has to raise funds to buy out Godrej Foods' 29 per cent stake in Godrej Pillsbury for Rs 31.13 crore and the acquisition of Godrej Soaps' 22.5 per cent stake in Godrej Sara Lee for Rs 99.17 crore.

Though reserves of Godrej & Boyce are pegged at Rs 202.71 crore (in 1997-98) on an equity of Rs 72 crore, a substantial amount of the company's funds are blocked in investments in subsidiaries. The company thus faces a liquidity problem, analysts state. The company's debts are also high at Rs 217.85 crore in 1997-98.

Commenting on the divestment announcement, Hagemeyer NV board member Graham Pickles said: "We have made a significant commitment to India which we believe to be a dynamic and fast-growing market with significant opportunities for not only IT distribution but also other four years and this investment reflects our deep commitment to participating in the Indian market and serving our customers."