Ramco To Hive Off Infotech Arm? May Get Rs 125 Cr

Ramco Systems, a single-product information technology company that competes with ERP (enterprise resource planning) segment majors such as SAP and PeopleSoft, is being spun off into a separate company. The value of the hived off firm is expected to be around $150 million. Company officials were unavailable for comment on the issue. Ramco's ERP solution, Marshall Version 3.0, was launched and endorsed by Microsoft's Bill Gates, when he had come to India last year.

Currently, Ramco Industries, the parent company of Ramco Systems, is talking to some United States-based venture capital funds to sell 20 per cent stake in the infotech company. Analysts say that the parent is finding it difficult to meet the funding requirements of its software division and the move to spin off the systems division as a separate company makes sense. According to them, this will reduce the financial strain on the company. As of now Ramco Industries would have invested somewhere around Rs 100 to Rs 125 crore in developing Marshall and it is yet to make money from the product.

A 20 per cent dilution of stake could mean an inflow of Rs 120 to Rs 125 crore for Ramco Industries. Ramco Industries has floated four subsidiaries in the US, Switzerland, Malaysia and Singapore, all under the name of Ramco systems and only the cost of setting up these companies have been capitalised in the balance sheet which was Rs 40.18 crore as on March 31, 1997. Ramco Systems posted a turnover of $16 million in the financial year 1997-98.

Analysts said that in the current financial year, the performance of the company is going to be much better with good repeat orders coming in from the US and a healthy order book position in the European segment too. They add that Ramco Systems can double the turnover to $30 million in the current year and can turn profitable from this year onwards. The infotech firm has a good client bas both in India and Europe. Locally, Marshall has been installed at the Jindal group and Coates Viyella. In Europe, its client is SMH, the maker of Rado and Swatch brand of watches. In Malaysia, it has Ramgate Systems, a group company of DRB-Hicom, manufacturers of the Proton car, as its client.