BPL set to finalise equal stake venture with Sanyo

The BPL Group is close to signing a joint venture agreement with $21-billion Sanyo Electric Company.

The deal, which is expected to be 50:50 or skewed towards a majority stake for Sanyo when signed, will culminate after protracted negotiations between the two consumer electronics companies.

Sanyo has been a technology partner with BPL for the past two decades. The new venture will initially focus on colour TV (CTV) business.

BPL's two CTV factories at Noida and Bangalore will be shifted under the new joint venture, which will also handle the entire distribution and marketing of CTVs.

The valuation of this deal is not clear as yet. No official statement were available from the companies.

With this move, Sanyo will make its much delayed entry into India. A host of consumer durables multinationals such as LG, Samsung, Sony have already made a deep impact in India.

These global corporations directly imported their products initially, and could offer more competitive prices than BPL.

BPL, on the other hand, had invested heavily in complete vertical integration right from the raw materials stage to the end product level. To top it, it had to advertise heavily too.

The group also diversified into unrelated sectors such as power generation with significant investment, thus spreading itself too thin. The company subsequently was caught in a debt spiral, which now stands at Rs 1,000 crore.

BPL Ltd, the flagship of the group, 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.

In an earlier interview with Business Standard BPL Ltd, its vice president (finance), P V K Sundaram, had said: "An active debt restructuring on. Equity infusion from Sanyo is also being worked. We should be confidently moving ahead with the restructured group."

Sundaram had also stated that they intend to be back in the black during the next three years which will also see them bouncing back with a 14 per cent market share in the colour TV market.