Hcl-Hp Break Up Win-Win Move For Both

The promoters of the country's leading infotech joint venture, HCL-HP, who recently parted ways have said that the break up of the alliance will actually lead to a win-win situation for both.

Elaborating on the plans of his group, the main promoter of the HCL group Shiv Nadar said it will enable the HCL group to move into the solutions and systems integration business in a much bigger way than ever before.

"Earlier HCL was restricted by the joint venture agreement with HP to carry on its SI business only within India. With HP withdrawing its equity participation in the venture now we can take the business to any country we like.

 

HCL would continue to be HP's exclusive distributor for higher end products like work stations and servers, according to Suresh Rajpal, president Hewlett-Packard India.

As reported in Business Standard earlier the promoters of the HCL group have bought out the HP stake in the company taking their share holding to over 70 per cent. About 11.5 per cent the rest is held by financial institutions while public and the employees hold the remaining shares.

The promoters of the HCL group have formally announced that they will be buying back the 26 per cent equity held by Hewlett-Packard in their erstwhile joint venture HCL-HP.

The promoters do not have to make a public offer, Nadar said, since as per the joint venture agreement between the two companies, each retained the first right of refusal in case either of them wanted to sell off their stake. "Since HCL promoters have themselves bought out the entire HP stake, they need not make a public offer, "Nadar explained.

"In fact, we have been gradually moving out of the manufacturing of these products for the past six months," Nadar said.

He justified the decision on the ground that that the volumes sold in India -- around 1700 last year and that too of more than 20 different varieties -- hardly require maintaining a manufacturing set up.

"Moreover, with the import duties coming down from 300 per cent in 1991 to around 20 per cent and due to phased out altogether by 2005, it no longer makes sense to make these products in the country," Nadar said

After the split the company rechristened HCL Infosystems will continue to manufacture its indigenous range of PCs and servers called Infiniti, Busybee and Beanstalk, but manufacturing of HPs workstations and servers will cease.

Commenting on the split Dick Warmington, vice president and managing director Hewlett-Packard, Asia Pacific said: "We consider India as a key market in Asia and our investments in India and HCL Infosystems is key to our future strategy. HCL will continue to have exclusive arrangement for the HP RISC/UNIX product line in the times ahead."

With HP withdrawing its equity participation in the venture, we can take the business to any country we like

Shiv Nadar Promoter, HCL group