Pcl To Spin Off Mindware, Eou

Faced with an acute working capital crisis and mounting interest burden, the Rs 1350-crore PCL group plans to undertake a restructuring exercise which will involve hiving off its software development unit Mindware, and its 100 per cent export oriented unit at Gurgaon into separate joint ventures with foreign partners.

The restructuring will essentially aim towards greater integration of operations among its marketing and servicing arms, PCL Ltd and the manufacturing company Altos. As part of the effort, Ernst & Young has been commissioned to prepare a detailed financial report and update the company's books of accounts, while management consultant Arthur Andersen has been appointed to undertake a total evaluation of Mindware's operations. The company is facing an unprecedented shortage of working capital estimated to be around Rs 50 crore. This has led to the postponement of almost all major projects announced PCL last year.

The company's interest burden alone is estimated to be over Rs 40 crore.

Huge overdrafts in May, June and July 1996 led to the company asking for enhanced limits on working capital needs. However, a seven-member bank consortium was reluctant to accede till its dues were cleared. The problem was further aggravated when the company announced massive price cuts in computers during September. While accepting bookings, the company asked for 100 per cent advance primarily to pay back its dues.

However, the price offer led to huge orders and the company, unable to tackle the demand and the sheer logistics of ensuring supply of the machines, plunged into further crisis.

The first steps in the restructuring process were initiated when Altos' financial year was extended to a 15-month period to achieve greater integration with that of PCL Ltd. Altos is the manufacturing arm of the group which supplies computers to PCL. The Gurgaon facility is a division of Altos and it takes up contact manufacturing on behalf of leading IT companies. It has one of the largest facilities using sophisticated surface mounted technology (SMT), for the manufacture of high-speed motherboards.

At a recently held extraordinary general meeting, the Altos board approved hiving off of the EHTP division into a 100 per cent subsidiary of the company.

In the next step, this will be spun off as a separate joint venture company with equity participation from a multinational contract manufacturing company. The investment from the foreign partner will also be utilised to tide over the fund shortage currently estimated at around Rs 50 crore.

PCL is talking to US contract manufacturing companies like SCI and Soletron for a possible tie up. The partner's stake in the equity will be finalised after negotiations are complete and the entire process will take another six months.

Mindware, was set up in 1994 as part of the group's diversification into software business. It has four technology parks which undertakes software development jobs for various companies.

The company is based in Bangalore and is expected to have recorded a turnover of $40 million last year.

DGIR probe ordered

Press Trust of India New Delhi

The Director General of Investigation and Registration (DGIR) has initiated a probe into Pertech Computers Ltd's (PCL) order booking system of 100 per cent advance payment .

PCL allegedly resorted to unfair trade practices under its booking scheme, by way of taking advance payment and delaying supply of computers.