D-Link India okays demerger

D-Link India, the listed arm of Taiwan-based D-Link Corporation, has approved the demerger of its Indian business. The board has approved a two-way split of the business, with sales and marketing going to D-Link (India), while the residual business will be handled by Smartlink Network Systems. The proposal is subject to shareholders' approval.

Each shareholder of D-Link (India) will receive a share (face value Rs 2) of Smartlink Network. Post-demerger, Smartlink will be listed on both the Bombay Stock Exchange and the National Stock Exchange.

D-Link (India) will be responsible for sales and marketing of D-Link's branded active networking products. It will focus on D-Link's global and locally-developed products.

On the other hand, Smartlink will handle the business of captive and contract manufacturing, research and development (R&D), voice over internet protocol (VoIP), routing products, design and development and structured cabling.

Currently, D-Link Corp has a 32 per cent stake in D-Link India, K R Naik and Associates 26 per cent and the rest is with the public. Post-demerger, D-Link Corp (Taiwan) will hold 60 per cent in D-Link (India), K R Naik and Associates 2 per cent and the rest will be with the public.

D-Link Corp will have no stake in Smartlink, while K R Naik and Associates will hold 62 per cent and the rest will be with the public. K R Naik, the chairman and promoter of D-Link, will receive $5 million (over Rs 20 crore) from D-Link Mauritius as a result of the share-swap deal.

"For D-Link, this is not a new set-up. Even the parent company had gone through similar restructuring and the benefits are there to be seen. The manufacturing business was separated from sales and marketing and R&D. This focused approach will help us accelerate our growth in India," said A P Chen, CFO and executive V-P, D-Link Corporation. D-Link India, with Rs 303-crore revenue in FY08, will have a revenue split of 50:50 between the two entities.

Jangoo Dalal, CEO and managing director, D-Link India, will manage both the operations till the transaction is final and both the businesses are running smoothly.

K R Naik said the demerger will allow a sharper focus on the two distinct sets of activities. "D-Link Corp never objected to the other business that we have got into. But with the growing networking market in India and the need to take competitors like Cisco head on, we need to bring this focus into the networking business," said Naik.