Siemens-Matsushita Unit To Buy Asian Elect Arm

Asian Electronics, the Rs 137-crore electronics major will sell its AC capacitor division as a going concern to Electronic HiTech Components (EHC).

Siemens and Matsushita have a majority holding in EHC. The unit will be transferred for $5.6 million and will be effective from October 1, 1998.

The Asian Electronics management said the AC capacitor division had failed to achieve growth commensurate with the overall growth of the company. It also failed to fare well in exports.

Asian Electronics had earlier planned to re-vitalise the capacitor division by investing substantially, but soon decided against it. It felt the return on investment in a transfer will be higher than the option of additional investments in a company's own division.

 

As per the transfer deal worked out between Asian Electronics and EHC, the former will also receive 2 per cent royalty on sales of EHC's capacitor division for the next five years besides a consideration of $5.6 million.

The land and building of the capacitor division will not be transferred to EHC. The division contributed Rs 39.36 crore to Asian Electronics' turnover of Rs 139.76 crore in 1997-98. It consists of manufacturing and marketing of metallised film and capacitors.

Asian Electronics is a minority shareholder with 26 per cent equity in EHC while the other partners, Siemens and Matsushita Components GmbH, together hold 74 per cent equity.

Asian Electronics also has plans to increase its equity in EHC from 26 per cent to 40 per cent, which would entail an additional investment of Rs 6.17 crore. EHC is presently an export oriented unit manufacturing DC capacitors and solar panels. With the transfer of the AC capacitor division, the company now plans to concentrate on the energy servicing (Esco) division consisting of manufacturing and procuring energy saving equipment and supplying them to customers on an operating lease basis.

It also undertakes responsibilities for manufacturing, installing, commissioning, maintaining and guaranteeing the performance of energy conservation equipment. During 1997-98, the Esco division contributed Rs 94.06 crore to company turnover.

Asian Electronics has also entered into an agreement with International Finance Corporation (IFC), Washington, for providing financial support to the Esco division.

As per the agreement, IFC has subscribed to 12 per cent of the company's equity. It has also sanctioned a term loan of $16 million for financing the deployment of energy servicing assets under Esco contracts. The company is yet to utilise the loan facility.