More transfusion being planned for long-ailing ITI

After failed attempts to find private partners for the country’s oldest and long-ailing telecom equipment company, Indian Telephone Industries (ITI), the UPA government is giving another try for its revival.

The Board for Reconstruction of Public Sector Enterprises (BRPSE) will take up the case of ITI in its next meeting, on May 31.

The company has six production units, including one at Rae Bareli, the Lok Sabha constituency of UPA chief, Sonia Gandhi.

“ITI was the leading telecom company a few years ago. It will be our endeavour to bring it back to its days of old glory,” Nitish Sengupta, chairman of BRPSE told Business Standard.
 

BALANCE SHEET ITI financial performance                                           (in Rs crore)
Year	2005-06	2006-07	2007-08	2008-09
Sales	1,749	1,818	1,210	1,741
Employees cost	382	365	383	401
Profit/(loss) before tax	-428	-404	-357	-668
Profit/(loss) after tax	-429	-405	-358	-668

Last month, the government found no takers to buy stakes in the chronically loss-making company that was the first to be put up for divestment by the second UPA government after it was returned to power in May 2009. Three out of the six production units of ITI were put up for sale but they didn’t attract any bid. China’s Huawei and Franco-American telecom equipment maker Alcatel-Lucent were the only two companies that showed initial interest to take up equity but finally didn’t bid. The government had invited investors for the Rae Bareli, Bangalore and Naini units. These make WiMax modems and optical transmission equipment.

Sengupta hinted the company might be asked to expand its range of products and find space in emerging technological areas, including the fast-rising mobile phone market. “Long ago, the Bangalore unit of ITI was the sole telephone receiver producer of the country.

The demand was so high that consumers had to wait for six-seven months to get a new connection with the receiver. But, now, as the cell phone market is growing fast, the company will have to cater to newer markets.”

BRPSE is also banking on committed orders from the defence and telecom ministries for supply of equipment, for preparing the prescription for the ailing ITI. It may also recommend downsizing of staff and sale of some real estate to reduce overhead costs and reduce losses. It may also tell the government to dole out yet another package for the sick company.

Set up in 1947, the loss-making company has factories in Rae Bareli, Naini and Mankapur in Uttar Pradesh, Palakkad in Kerala, Srinagar and Bangalore. Although it achieved sales growth of more than 40 per cent in this financial year and achieved a turnover of Rs 1,741 crore, it still incurred a net loss of Rs 668 crore. “This happened primarily due to the legacy of fixed expenses, financing expenses, including foreign exchange variations on account of dollar value fluctuations and manpower-associated salary and social welfare costs,” S K Chatterjee, the company’s chairman and managing director said in his annual report.

The government had earlier given a Rs 2,820-crore financial package, besides according in-principle approval for additional working margin of Rs 180 crore. And, Rs 125 crore was sanctioned to ensure the staff got their pay.