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Escorts to sell off ECL stake to LG arm

The Escorts Group has decided to sell off its entire holding in Escorts Communications Limited, or ECL, to Korean chaebol LG's communication arm -- LG Information and Communication Limited, or LGIC -- over the next three months, ECL chief executive officer Rajan Swaroop said.

"We have decided to exit the venture and just concentrate on our other two telecom businesses -- Hughes Escort Communications Limited, or HECL, and Escotel," Swaroop said in New Delhi today.

Though he refused to divulge financial details of the transaction, Swaroop said with this deal, Escorts would move out of the telecom hardware manufacturing business.

''Under ECL, Escorts was manufacturing PBX and rural automated exchanges. However, the company had eroded its net worth and fallen under the purview of the Board for Industrial and Financial Reconstruction, or BIFR. But now with the LG group company having already picked up close to 49 per cent stake in the venture, the company has changed its product portfolio to include wireless in local loop, or WLL, equipment. Since that is LGIC's proprietary technology, we would not have much to do there and so are exiting the venture,'' he added.

''We feel that we are not creating much value to the venture and so have decided to move out of it.''

Escorts has divested 23 per cent stake in Hughes Escorts in favour of its foreign partner Hughes Network Systems of the United States and ICICI Limited. Under the deal, Escorts Limited will be entitled to 50 per cent of the appreciation in value of shares over and above 75 per cent in three years.

HECL was floated as a 51-49 joint venture with Hughes controlling the majority stake. However, due to change in the guidelines, the foreign partner had to reduce its holding to 49 per cent and a two per cent stake was transferred to a trust.

ECL had come out of the purview of BIFR following the equity infusion by LGIC. The Korean company had picked up 49 per cent stake in the company for Rs 99.9 million, taking the total net worth of Escorts Communication to Rs 199.9 million compared to accumulated losses of Rs 188.9 million.

The BIFR had noted that since the company had succeeded in making its net worth exceed the accumulated losses, it ceased to be a sick company.

LG's investment plans gain significance since Escorts Communications, a 100 per cent subsidiary of Rs 32-billion Escorts Group, had approached BIFR following complete net worth erosion by accumulated losses of Rs 168.9 million.

The venture has now emerged as the lowest bidder in the $ 24 million WLL tender of the Department of Telecom, or DoT. The company would begin supplies to DoT by June this year.

Escorts Group to set up three portals

The Escorts Group is planning to set up a portal each for its three thrust business areas of agri-machinery, health and telecom, a senior company official said today.

Announcing the launch of the portal for agri-machinery business -- Automatrixindia.com -- Esconet Services Limited CEO Rajan Swaroop said, ''We have identified it as one of the growth areas and want to use it in our businesses.''

The company has joined hands with the US-based Vistaar and i2 Technologies Inc to launch the auto-components trading Web site. The site will be the country's first online business-to-business market place for the auto-components industry, Escorts Group chairman Rajan Nanda said. Escorts will participate in the joint venture through its wholly owned subsidiary Esconet.

''Automatrixindia.com will cater to all the trading needs of original equipment manufacturers, suppliers, dealers, banks and others connected with the automobile industry,'' Nanda said.

The company would be inviting other players in the automobile arena to pick up stake in the venture, Swaroop said, adding that it intends to achieve a total capitalisation of Rs 250 million. The final equity holding in the venture would be decided by June this year.

Vistaar and i2 Technologies will provide the Internet support for the running of the site. The Web site, to be launched during the last quarter of 2000, will enable buyers and sellers to reduce the cost of procurement, Nanda said.

Escorts brand to go off bikes

Escorts Yamaha Motor Limited, or EYML, is being rechristened Yamaha Motors Escorts Limited following the Escorts Group's decision to sell off 24 per cent stake in the motorcycle making joint venture to its Japanese partner Yamaha Motor Company, or YMC.

The board of directors of EYML will meet on May 26 to approve the new name. ''We will be handing over the entire business and management to Yamaha on May 26,'' Escorts Group chairman Rajan Nanda said.

The existing board of directors would also resign that day and a new board would be constituted. ''Even I am not aware of the new board structure, so I cannot give any details on the same now,'' he added.

Pursuant to the sell-off, the Escorts brand name is likely to go off the bikes being manufactured and marketed by Yamaha Motor Escorts Limited. ''The motorcycles were hitherto being sold under the Escorts-Yamaha brand name, but now it would be marketed with just the Yamaha tag.

When asked if Escorts would be willing to wash its hands off the entire holding in Escorts-Yamaha, Nanda said, ''I have no intentions of selling off the entire stake to Yamaha. Escorts will retain the 26 per cent stake we now hold in the venture.''

UNI

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Yamaha to move FIPB

Escorts to sell 24% to Yamaha in subsidiary

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