Smartlink Network Systems on Thursday said it would sell its Digilink Business to Schneider Electric India for Rs 503 crore.
Its shares jumped as much as 20 per cent to Rs 93.95 in intra-day trading, but finally closed 13.73 per cent down at Rs 67.55 on the Bombay Stock Exchange. Smartlink shares also touched an intra-day low of Rs 65.15.
An analyst tracking the company said one reason for the markets to react so sharply was that minority shareholders would not benefit from this transaction. Since it is a slump sale, and not a stake sale, there would be no open offer, according to him. He said Digilink was the biggest business the promoters had and they had not made it clear what they planned to do with the proceeds and what minority shareholders would get.
Smartlink’s Digilink Business comprises the company’s passive networking business, including manufacturing, marketing and sale of structured cabling products. The Digilink Business had sales of Rs 155 crore in the twelve months to December 2010. Smartlink had reported revenues of Rs 178.52 crore for 2009-10.
The transaction would primarily include transfer of the Digilink brand and trademarks, manufacturing facility at Goa, the distribution network and the employees relating to the business. Smartlink has also agreed to a non-compete condition for five years for the passive networking business. The transaction is subject to the approval of shareholders and conditions.
On a call with select media, the company’s Executive Chairman K R Naik said: “We are a cash-rich company. Other than the Rs 503 crore, we also have cash reserves of around Rs 100 crore.”
Smartlink has presence in the networking segment, with Digisol and Digicare. Digisol caters to the active networking space while Digicare is its network of RMA/Service Centers and service partner.
across the country. Smartlink also undertakes electronic manufacturing services at its facilities in Goa.
“We are pleased to enter into this agreement as the transaction recognises the value of Digilink’s pre-eminent position in the structured cabling business, including the strengths of the brand, the strong network, support and dedication of our distributors and last but not least, a well-qualified, capable and motivated workforce,” Naik said in a statement.
The sale of Digilink follows the company’s demerger with D-Link India in 2008. The entity was created with Taiwan-based D-Link. The business was then renamed as Smartlink. K R Naik, the chairman and promoter of D-Link, had received $5 million (over Rs 20 crore) from D-Link Mauritius as a result of the share-swap deal.
