The board of BPL Sanyo Utilities & Appliances Ltd on Friday accorded an in-principle approval to merge the loss-making BPL Refrigeration Ltd, BPL Sanyo Finance Ltd and Alpha Securities Ltd (both closely held companies) with itself effective April 1, 1999, subject to all necessary approvals.

According to an official in the group, the Japanese firm was not averse to taking an equity stake in the merged entity. This would pave the way for it to make its presence felt in the consumer electronics market in India. Thus far, Sanyo's presence has been restricted to technology tie-ups and buy-back arrangements (in the batteries venture) with BPL, with the exception of its stake in the finance company. Since BPL Sanyo Finance Ltd (a closely held company under the BPL group) is a 50:50 joint venture between the BPL and Sanyogroups, the Nambiars will have to offer a stake in the new entity to Sanyo after finalising the swap ratio for the proposed merger.

Sanyo officials recently made it clear that the company was not willing to pull out of the joint venture BPL Sanyo Finance with the BPL group due to strategic reasons. ``As long as the existing equity structure continues like this, they will have a stake in the new entity,'' the official added. However, top officials in BPL declined to confirm or deny the developments.

Sources said that for Sanyo a long-time partner of the Rs 3,000-crore group the entry into the country through BPL makes sense. Even after indigenising technologies for making BPL products in the country, the group is still depending on the Japanese conglomerate for both technical and marketing alliances.

For instance, BPL has a buy-back arrangement with Sanyo for 5 million units of alkaline batteries from its Dobaspet manufacturing unit. To manufacture alkaline batteries BPL, the flagship firm of thegroup, currently has a tie-up with Sanyo. BPL was also eyeing technology for its forthcoming rechargeable batteries from Sanyo. BPL Sanyo Finance, headed by MA Uppal, has posted a profit before tax and depreciation of Rs 9.35 crore on a total income of Rs 22 crore during fiscal 1997-98. The company is primarily engaged in non-banking finance activities like bill discounting, hire purchase, leasing, etc.

These developments follow a debate for almost two years on the merger issue. Earlier, the group had assigned the Mumbai-based NM Raiji & Co and Dalal & Shah for preparing a recast strategy.