RPG merges subsidiaries

RPG Enterprises has decided to merge RPG Transmission and National Information Technologies with KEC International.

KEC and RPG Transmission are both engaged in the setting up of power transmission lines, power distribution networks and railway electrification. Last year, KEC posted a net profit of nearly Rs 100 crore on a total income of Rs 2,100 crore. The company has operations in the North American, central Asian, West Asian and African markets.

RPG Transmission is a relatively small company, which recorded a net profit of nearly Rs 26 crore on a total income of Rs 370 crore last year. National Information Technologies is an unlisted company of the group, engaged in setting up and operating telecom infrastructure.

The boards of directors of these companies will meet on Monday to approve the merger proposal. Following the approval of the boards, the shareholders' nod will be sought through postal ballot.

The companies are expected to announce the merger ratio on Monday.

Experts said the proposed merger would provide an opportunity for KEC to get into the growing telecom infrastructure space. Also, the merger would enable National Information Technologies to take on its bigger competitors.

In short, an analyst said, the merger would create a formidable entity which could post a total income of Rs 3,200 crore by the end of this year and Rs 4,000 crore by 2009.

Kolkata-based RPG Enterprises, which holds a 40 per cent stake in RPG Transmission and 35 per cent stake in KEC, has been streamlining its operations over the last few years. Recently, its pharma outfit RPG Life Sciences, formerly known as Searle India, had hived off its investment subsidiary. Prior to that, the group's tyre company, CEAT, spun off its investment companies.

Analysts said the RPG group was consolidating its business in the power infrastructure business before taking a big plunge into the power business. It had recently announced an investment of Rs 12,000 crore in the power sector. For the power business, the group is looking at opportunities in West Bengal, Jharkhand and Orissa.

On Friday, the share prices of KEC closed 3.4 per cent higher at Rs 593.80, while the RPG Transmission stock closed at Rs 268 on the BSE, 7.29 per cent higher than the previous close.