BPL going to bet big on mobile handset business

The debt-ridden consumer electronics focussed BPL Group, which recently hived off its colour television business to a joint venture company with Sanyo, is betting big on entering the fast growing GSM mobile handset market dominated by the likes of Nokia, Ericcson, Motorola, Philips, LG and Samsung. The group is hoping that this business will help it manage its Rs 1,240 crore of debt.

Trial runs are already going on at the company's handsets manufacturing facility in Bangalore. It, however, refused to divulge the capacity being installed. If this project of the accident prone group actually gets under way, it will be the first Indian foray into the handsets market.

BPL, through its newly launched Wireless Communications Solutions Group, is entering the handsets market with technology from Texas Instruments. It hopes to capitalise on the booming Indian GSM market which is expected to grow from 32 million subscribers in mid-2004 to 85 million units by 2008.

BPL intends to cash in on the absence of strong domestic brands by offering BPL's inherent strengths. "BPL will use its strong brand image, its deep rooted understanding of the market, its service strengths as well as nationwide coverage to compete against other brands in the business," said Ajit Nambiar, CMD of BPL Limited.

With its mainstay CTV business expected to get a boost from the participation of joint venture partner Sanyo, BPL Limited will continue its restructuring exercise and arrange to repay the balance of debt. Funds will be raised from divestment of non-core business, fresh international borrowings and cash flows from other key businesses such as Wireless Communications, Soft Energy, Health Care, Engineering & Manufacturing Solutions.

The group has for nearly two years been undergoing a "comprehensive restructuring of its operations, which includes redefining its business portfolios, improving efficiencies of its business processes and re-aligning its financial liabilities to a sustainable cash generation level," said Nambiar.

He added that "a majority of the debt is being retired on a one time settlement basis. The remaining debt will be restructured for repayment on a long-term basis carrying substantially reduced interest rates. The funding requirement for pay out under negotiated settlements and for fresh working capital is being met out of multiple sources including divestment of non-core businesses, sale of investments with long gestation periods and contribution by strategic partners."

The partnership with Sanyo gives BPL $80 million (approximately Rs 368 crore), of which $70 million (approximately Rs 322 crore) will be used to meet commitments towards lenders and creditors.

Sanyo will also help in raising funds for the proposed JV Company. "Equally important, it provides BPL an opportunity to rejuvenate its CTV business and regain its leadership position. Settlement of the lenders liabilities is the first and most important step in the successful completion of the restructuring exercise of BPL Limited. It will immediately place the restructuring exercise on a fast track," added Nambiar.