Siemens India will trim workforce, repay high-cost loans and raise fresh equity to improve its skewed debt-equity ratio in a bid to claw its way back to profitability.
The company, which posted a huge loss of Rs 84.5 crore for the 12 months in 1996-97, is looking at cutting costs by at least Rs 100 crore over the next two years by various measures. It also proposes to bring down its total borrowings from Rs 500 crore to less than Rs 250 crore.
"More than the rate, we are also looking at reducing the volume of borrowings. We need to cut down our working capital requirements. The ultimate objective is to lower the total financing cost to the company and improve our debt-equity ratio," said Heinz-Joachim Neubuerger, executive director, Siemens. The current debt-equity ratio is 2.5:1 and Neubuerger says he wants it at 2:1.
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It intends to raise funds from the commercial paper market and is planning to tap other low-cost means of finance. Despite the huge loss, Crisil has accorded the company P1+ for its forthcoming Rs 50-crore commercial paper programme.
To improve its debt-equity ratio, Siemens proposes to raise fresh equity. Whether it will be in the form of a public or a rights issue will be known in four weeks, said Neubuerger.
Asset disposal by selling off the company's office buildings at Worli in Mumbai and infusion of Rs 60 crore by the transferring the telecom business to a new joint venture will help the company in reducing the total borrowings from Rs 500 crore.
Moreover, it plans to move into a separate office complex at Kharghar, New Mumbai, by selling off its six-storeyed building at Worli. For this, a tender has been floated and talks are on to find a buyer.
Besides, Siemens will soon announce a voluntary retirement scheme for its employees who number 7,500 now. J Schubert, managing director, said it will be done in consultation with unions and all the employees.
The company is reviewing its entire product portfolio, which number at least 1,000. In consultation with parent Siemens AG, the company is also reviewing ways to improve productivity, reduce material costs and improve process efficiency.
In this review, some of the products could be eliminated or could be outsourced or imported.
"We have benchmarked our competitiveness with those of other international companies. In this, we find that our costs are atleast 10 to 30 per cent higher. We want to bring that down," explained Schubert.
To pick up 30% in Singapore venture
Siemens India will pick up 30 per cent stake in a new joint venture to be formed with the 100 per cent subsidiary of Siemens AG based in Singapore, called Siemens Compo-nents Pte. The Singapore company will hold the remaining 70 per cent and the joint venture will design customised application specific integrated circuits. Siemens Components Pte is part of the global semi-conductor business of Siemens AG.
The joint venture will only design chips and not manufacture them.
This is part of Siemens' strategy to enter high-tech areas.
It is talking to its parent to introduce more high-tech, electronic products into the country.
Siemens officials said only a small volume will be handled, adding they are
against investing huge sums in the new products.
In 1996-97, Siemens invested Rs 81.2 crore, down from Rs 165.40 crore in 1995-96. For 1997-98, starting October 1 this year the company is likely to invest around Rs 100 crore in modernisation and new ventures.