With this, Siel Ltd's holding in the joint venture would be reduced from 48 per cent to a mere 5 per cent, sources said here on Tuesday. Plansee Tizit's stake would effectively be hiked from 52 per cent now to 95 per cent.

The company on Monday also bagged the Foreign Investment Promotion Board (FIPB) nod for going ahead with the sell-off. According to the application placed with the FIPB, the joint venture company was planning to raise an aditional Rs 10 crore capital over the present capital of Rs 36 crore.

"However, given the cash flow constraints, Siel expressed its unwillingness to contribute to the capital hike. So, the entire amount is being raised by the Austrian company. This additional equity infusion would alter the equity distribution from 52-48 at present to 67-33 in favour ofPlansee Tizit. Of the hiked capital base of Rs 46 crore, Siel share would be Rs 15 crore," the sources said.

Besides, under the restructuring programme which the Siddharth Shriram group has undertaken, it was planning to reduce its holding in the joint venture to 5 per cent.

"We had requested Plansee Tizit to purchase a major chunk of our holding in the company. Though, they have in principle agreed to the buy-out, the final price for the same has not been fixed as yet."

The share sell-off to Tizit would be done by way of a rights issue for one crore shares. Siel-Tizit board has already approved the transfer and with the FIPB approval under its belt, the company is planning to approach the Reserve Bank of India for a final clearance.

It may be recalled that Siel-Tizit, which has accumulated losses to the tune of Rs 18 crore up to February 1998, was floated as a 50-50 joint venture. However, non-availability of liquid cash to fund the joint venture's expansion programme led to divestment of 2 per centstake by Siel in favour of Plansee Tizit.

This is the third company in which Siddharth Shriram is selling off equity in favour of the foreign partner. He has already washed his hands off Honda-Siel Power Equipments Ltd, the generator manufacturing joint venture with Honda of Japan, and now holds only a 5 per cent stake in Honda Siel Cars India Ltd (HSCI). However, Shriram is hopeful of buying back 15 per cent holding in HSCI by October-end 2000 for Rs 54 crore.

STL has a factory in Calcutta for hard metal manufacturing and an office for refractory in Delhi. The company manufactures all generation inserts, that is coated, uncoated, tanning and milling, at its Calcutta plant.

Siel Ltd, as part of its restructuring exercise, has decided to freeze all capital expenditure and is selling off non-core businesses, including the financial services venture, as well as its immovable assets to raise funds and help the company move out of a massive debt trap.

The group would now concentrate on its corecompetencies and intends to remain in the businesses of oil, sugar and chemicals.

Besides, the company has also decided to ask all its joint venture partners in varied businesses to buy out the ventures, "So that we can concentrate on our core competency." The Siel-Tizit sell-off is as part of this move.

The company is also hopeful of finalising a joint venture partner for its airconditioner manufacturing venture -- Siel Aircon. Regarding Siel Financial Services Ltd, the group is in the process of leaking out the assets and liabilities in the company and would finally close it down.

On the business restructuring, Shriram had said, "Over the last ten years, we had made a lot of bad investment decisions and are now in the process of correcting them. So we are closing down everything that is not our core business. We are closing down financial services venture and other small businesses. We want to stay in oil, sugar and chemicals."

The group, Shriram said, had recently sold off its compressor businessfor Rs 90 crore and divested its stake in Shriram Honda Power Equipments for Rs 80 crore.

On the consolidation front, a chemical plant has been commissioned recently in Punjab and "though we were planning a vanaspati unit, it could not be put up due to cash flow problems. Because of this, we are losing a lot of money daily and we do not have cash to go ahead with the project now."

As a remedy, the company has stopped all capital expenditure.

Regarding Siel Overseas Ltd (SOL), the UK-based 100 per cent subsidiary of Siel Ltd, Shriram said, the company has been converted into a 50-50 joint venture by divesting stake in favour of Thorn and Longley, Britain.

The investment in Covrad Heat Transfer Ltd (CHTL), another UK-based company, has been exchanged as part of the restructuring programme of SOL. CHTL, after obtaining the necessary approvals from RBI, has received preferencial shares shares worth 1.44 million as against its original investment of 850,230.