The debt-ridden BPL Ltd has finally decided to float a 50:50 JV with $21 billion Sanyo Electric Corporation.
The company is scheduled to finalise this at a board of directors meeting on Tuesday, July 27, 2004.
In a statement, the company said: “A meeting of the board of the company is convened on July 27, 2004 to consider and approve transfer of CTV business / undertaking to a 50:50 joint venture of the company with Sanyo Electric Company Ltd, Japan, and to invest in the equity share capital of the joint venture company subject to necessary approvals including shareholders and regulatory authorities and authorise the execution of appropriate agreements in that regard.”
The deal culminates in what has been a long and protracted negotiations between the two consumer electronics companies.
Sanyo, has been a technology partner with BPL for the past two decades and the new JV will initially focus solely on the colour TV (CTV) business.
It is expected that BPL’s two CTV factories at Noida and Bangalore will be shifted under the management of this new company and the entire distribution, marketing of CTVs will be handled from this entity.
The valuation of this deal is not clear as of yet but it is estimated that it will be in the range of Rs 150-400 crore. BPL’s contribution is expected to be from its manufacturing units and its distribution network for form its 50 per cent of its equity.
With this entry, the consumer electronic conglomerate Sanyo Electric will make its much delayed entry when a host of companies such as LG, Samsung, Sony took the Indian marketplace by storm.
It was the advent of these global corporations which initially directly imported their offerings and without the burden of manufacturing in India, they could offer the products at a much competitive prices than BPL.
BPL, on the other hand, had invested heavily in complete vertical integration right from raw-materials to the end-product and on top of it had to advertise heavily to be in the marketplace.
The group also diversified into unrelated sectors such as power generation with significant investment, thus spreading them too thin. The company subsequent went to the spiral of debt which finally has accumulated to a staggering Rs 1,000 crore.
BPL Ltd, is targeting a turnover of Rs 1,800 crore in two years time from the current Rs 1,200 crore and should be cash positive in three years time.
BPL reported a net loss of Rs 87.4 crore for the 6 months ended March 31, 2004, on a total income of Rs 176.2 crore.