The total consideration received for the low-voltage components business was Rs 75.5 crore, he said. This consideration was based on the net asset value of the business on September 30, 1997, he added.

Since the business was finally transferred on June 30, 1998, the sale consideration was subject to change depending on the net asset value (NAV) on the transfer date.

The sale price included Rs 27.22 crore for giving up the rights to manufacture low-voltage components in the country for a period of four years. It also included Rs 2.12 crore for transfer of leasehold rights of the Pondicherry land and buildings (engineering plastics business).

Besides, GE India had also agreed to take on lease the factory land and buildings at Hosur for a period of three years at an annual rent of Rs 1.20 crore. It also had the option of buying the Hosur property within a period of two years at a fair market value to be determined then, Poddar said.

The company's overall sales in the current year will be less compared with the 1997-98 sales of Rs 546 crore (inclusive of excise duty) due to sale of the low-voltage components business, he said. However, the resultant drop in profits will be offset by the reduction in interest costs and other cost-effective measures already initiated by the company, Poddar added.

The sale proceeds had been utilised in repaying existing loans amounting to Rs 42 crore, he said. In addition, the company intends to repay a Rs 12 crore foreign currency loan taken from GEC Alsthom SA of France during the year for working capital requirements. This will result in a Rs 5 crore savings in interest cost in the current year, he said.

On the company's current working, Poddar said the first quarter results showed a 8 per cent drop in sales and a net loss of Rs 11.38 crore. The order book position for motors and transformers was very poor and the company was "struggling to overcome this by various cost-cutting measures and other administrative controls, which included skipping of dividend."

On the impact of increased tariffs announced by the government, the chairman said the company's cost burden had increased by Rs 10.5 crore, of which Rs 2.6 crore was on account of special additional customs duty on imports at 4 per cent of landed costs; Rs 5 crore owing to 5 per cent increase in basic customs duty on copper and cold rolled steel; Rs 1.4 crore on restricted modvat credit up to 95 per cent and Rs 1.5 crore as a result of inflation on domestic purchases.

On other cost reduction measures, Poddar said the company had drastically cut the cost of annual reports to Rs 3 lakh from Rs 40 lakh in the previous year. Besides, the shifting of the corporate office from Delhi to Chennai will translate into yearly cost savings of about Rs 3.5 crore.

Company managing director KK Moradian pointed to `serious' problems in the rotating motors division and said "we were pushing sales and not collecting cash." The 40 per cent to 45 per cent price discounts prevailing at the moment were further eroding the division's profitability, he added.