Kyocera handsets maker XL Telecom to buy back Corning stake

Hyderabad-based XL Telecom a Rs 250 crore telecom equipment and CDMA handset manufacturing company is slated to buy back the 30 per cent stake of US-based Corning Inc in the company. This apart the company is looking at coming out with an initial public offering in the next ten months.

Managing director Dinesh Kumar said the 30 per cent stake held by Corning in the company would be bought by XL in the next six months.

"It is a historical stake and came Corning's way because of their acquisition of RXS, a division of Siemens AG, which had earlier invested in the company in 1985."

XL, according to Dinesh would be paying Corning "a couple of crores" for the stake. "The deal has been struck with Corning at the rate of Rs 25 per share," Kumar said.

Apart from Corning, three financial institutions "" IDBI, ICICI and IFCI "" together hold another 30 per cent in the company.

XL, which makes CDMA handsets for Japanese multinational Kyocera at its unit in the outskirts of the Hyderabad, is also going to start manufacturing fixed wireless terminals in collaboration with US-based AccessTel Inc.

The deal that was signed a month back is expected to give a leg up to the company's revenues, as AccessTel is understood to have a major share of the telecom business from the Tata's.

"This deal with AccessTel should help us gain considerable market share as it helps us to bid for the BSNL tender for supply of about 1 million fixed wireless terminals. The fact that the Rs 700 crore BSNL tender is to be coupled with supply of SMPS units will give us a good chance," he opined.

XL is also one of the few companies in India which makes SMPS or switch mode power supply units which are used by telecom companies to regulate power supply.

The BSNL tender is expected to allocate 50 per cent of the tender quantity to the L1 bidder, with the L2 and L3 bidders sharing 30 per cent and 20 per cent, respectively.

XL, which is targeting a 300 per cent increase in turnover from Rs 250 crore in the last fiscal year to about Rs 750 crore in the current fiscal year, expects to shore up its topline and bottomline with the start of its ethanol division in Nanded, Maharashtra.

The ethanol plant which has been put up by XL has the capacity to produce 1,50,000 litres of ethanol per day and the oil refining companies are expected to be the biggest customers of the company.

"Alfa Laval has provided us the technology know how and we expect to participate in the tenders floated by the oil companies for the supply of ethanol," Kumar said.

XL may benefit from Government of India guidelines which at present stipulate that petrol being sold in certain regions of the country should have a 5 per cent ethanol content.

This is expected to be upwardly revised to 10 per cent in the future. XL has entered into a contract farming arrangement with farmers in the Nanded area for growing sweet sorghum in about 20,000 acre at the rate of about Rs 400 per tonne of sweet sorghum.

"The ethanol business is expected to give us margins in the range of 25 per cent unlike the telecom business, which gives margins of only about 5 per cent," Kumar pointed out.

XL, according to Kumar, was readying for an initial public offering (IPO) in the next ten months to a year. The IPO is expected to give the company currency to look at some acquisitions in the telecom software area, apart from setting up marketing and servicing operations in the Middle East and Africa.

"We are not looking at a huge issue. We would ideally raise around Rs 30 crore and have appointed Grant Thornton India to help us streamline our operations ," Kumar said.