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`TDL merger will add to Alstom's reserves'

Our Bureau

CALCUTTA, Jan. 18

THE scheme of amalgamation proposing transfer of all assets, rights, properties etc, of Kerala-based Alstom T&D Distribution Transformers (TDL) to Alstom Ltd, okayed by shareholders at a court-convened meeting here on Tuesday, will result in a credit bal ance of Rs. 3.4 crores, besides tax benefits of Rs. 1.3 crores, for the loss-making Alstom.

Talking to newspersons after the meeting, Mr. K.K. Moradian, Managing Director of Alstom, said the balance, to be reflected as NAV in the books of the transferee company, will add to the company's reserves. I-T benefits, it is pointed out, may be to the extent of Rs. 1.3 crores. Alstom, for the year ended March 31, 1999, recorded a net loss of Rs. 9.5 crores on a turnover of Rs. 437.4 crores (Rs. 546 crores).

Explaining the rationale behind the merger exercise, Mr. Moradian said that following a total change in the market situation, manufacture of market-specific equipment (in T&D) at TDL was found to be unnecessary, hence the merger, as part of an overall st rategy at achieving synergies of operations.

Stating that the business of distribution transfers was severely hit by recession, resulting in a drastic reduction in sales (both volumes and price), Mr. Moradian said the merger move was in the best interests of all stakeholders, as any further delay w ould have made matters worse for TDL. As per the valuation exercise carried out by Fraser & Ross, the scheme, to take effect from April 1, 1999, entails a share swap ratio of 1:1, and the services of all TDL employees are to be transferred to Alstom Ltd.

Alstom Ltd is a subsidiary of Alstom Holdings SA, Paris, France, which holds 66.49 per cent of the paid-up equity of the Indian outfit (Rs 39.7 crore). Alstom holds 79.71 per cent in TDL. During 1997-98 and 1998-99, TDL made losses, and the erosion in pr ofits and production cuts led to overall deterioration in business opportunities. Sales slumped from Rs. 18.27 crores in 1997-98 to Rs. 14.76 crores in 1998-99.

Confident that Alstom would be able to return to the black in the near future, Mr. Moradian said each division of Alstom was being benchmarked with the best in the world across a whole host of production and management parameters. On the meters division, for which the company has been seeking a strategic alliance, he said that while efforts were on to improve the functioning of the division, the search for a viable partner to take over the business would continue. Restructuring on the manpower side (thr ough VRS) was continuing, he said. He also hinted at an improvement in the third quarter results.

On the progress of the share-price linked benefits plan (described as a virtual plan), under which the company's top managers, including the MD, will be able to avail of rewards linked to increases in the company's share price beyond a base level, he sai d various parameters were still being worked out, and nothing has been finalised yet. It was earlier decided that Rs. 75 per share would be the base level price.

Under the scheme, productivity of top managers would be assessed based on the scrip's movement. On Monday, the Alstom scrip closed at Rs. 44.50 on the BSE. Restructuring business operations to make each division a separate profit centre, was continuing, said Mr. S.K. Poddar, Chairman of the company.

Alstom is engaged in the manufacture and sale of items such as electric motors, pumps, switch gears and control gears, transformers, switches, relays, control panels, relays and energy meters. The company is also in the business of erecting and commissio ning power plants/power projects on a turnkey basis.