The funds raised would help the company reduce its high outstanding debt which currently stands at over Rs 226 crore last year. The infusion of funds through the high priced rights would improve the gearing or the debt equity ratio, which has deteriorated over the past few years to the current level of around 3:1.

The one for four rights issue would help the company improve its sagging reserves, which has eroded substantially over the past two-three years. Siemens' free reserves have dwindled from a high of Rs 258.17 crore in 1995-96 to the current level of just Rs 45.07 crore.

The rights issue has been priced at a 26 per cent discountto the current prevailing market price of Rs 270. The company's scrip over the past year has seen a high and low of Rs 320 and 170 respectively. The rights would result in the company's equity swelling by Rs 7.1 crore to Rs 35.5 crore. However, the reserves would improve by Rs 134.9 crore to around Rs 190 crore. Though the rights issue will dilute the earning per share, the high premium issue would push up the book value substantially from Rs 25.87 to Rs 63.52 per share.

Siemens rights issue could have not come at a better time when not only the company has staged a turnaround, but the economy too is showing signs of a revival. Siemens after a loss in the first quarter, has staged a comeback by reporting a net profit in the following two quarters. Better performance by power transmission and distribution systems and projects divisions has seen the company through. The likely reduction of debt coupled with restructuring is likely to result in the company breaking even in the full year as well.

As part ofthe restructuring, Siemens has worked out a four-pronged strategy to revive the company's bottomline. It includes portfolio review, introduction of new products & services, fresh investments and mergers and spin-offs. Siemens has reported a net profit of Rs 1.82 crore in the third quarter ended June 1999 against a net loss of Rs 15.26 crore in the corresponding quarter last year. The losses for the nine-month ended June 30 stand reduced to Rs 3.82 crore from Rs 56.02 crore in the corresponding period last year.

Siemens' improved performance reflects the restructuring activities undertaken by it. Turnover during the third quarter stood at Rs 206.82 crore, up 18 per cent from the corresponding quarter the previous year. New orders in the first nine months were to the tune of Rs 94.57 crore as compared to Rs 58.59 crore in the same period last year. The signs of a turnaround started emerging after the end of second quarter in March 1999 when Siemens staged a dramatic recovery with a net profit of Rs 16.65crore after a high net loss of Rs 22.3 crore in the first quarter.