It is learnt, that the company is considering two options -- either to sell the division to Finolex Telecommunications or lease it for five years.

The company said the restructuring is being done to provide for better utilisation of capacity and optimise use of productive assets at its Urse plant in Maharashtra.

The proposed company will be wholly-owned by the group flagship. The book value of the division has been estimated at Rs 30.38 crore as on March 31, 1998.

The Urse facility has a manufacturing capacity of 65 LCKM. As per the company's plans, if the division is leased out, it will be for five years, terminable at any time by the company after serving a written notice of three months.

In case the company makes a sell-out decision, Finolex Cables will appoint an independent valuer to work out a detailed valuation of the division.

The board of the flagship will be authorised to determine the sale price or lease rental, as the case may be, for the transfer of the division. The company, it is learnt, will seek shareholders' approval for the recast at its next annual general meeting.

The new company, Finolex Telecommunications, will have an Rs 50-lakh authorised share capital, divided into five lakh equity shares of Rs 10 each. The existing paid-up share capital is held equally between promoters PP Chhabria, the chairman of Finolex Cables, and KP Chhabria.

During 1997-98, Finolex Cables produced 3.12 MCKM of jelly-filled telephone cable, while light-duty cables output increased from 264.6 TCKM to 291.7 TCKM. The power-cable production, however, declined from 3.75 TCKM to 2.51 TCKM.

"Increase in production of the telephone cables and light-duty cables is significant in the context of a general slowdown in the country's industrial production and continuously growing competition from new producers," the company said.

Meanwhile, Finolex plans to set up a Rs 75-crore facility for the production of light-duty cables in Goa. The plant, for which land has been identified, is likely to go on-stream in 2000.

The company, over the years, has set up a string of joint ventures with various international majors. The joint venture with Lucent Technologies of US for manufacturing fibre-optic cables has suffered a setback owing to lack of orders and unremunerative prices of Department of Telecommunications (DoT) tenders.

Finolex Essex Industries, the venture with the Essex Group Inc, for production of copper rods, has failed to meet targeted production levels due to teething problems.

The project provides backward integration by assuring copper-rod supplies of consistent quality almost on tap, necessitating lower inventory carrying requirements.