Hotline's managing director Anil Gupta is expected to step down as Konka vice-chairman in the next few days, Hotline sources said.

Top management sources in Hotline, which holds 25 per cent equity in the joint venture, said its decision to snap ties will be formally conveyed to Konka shortly.

Hotline joins the growing list of Indian companies which have fallen out with their foreign partners. Konka Electronics (I) Ltd is a three-way joint venture in which the Chinese company holds 51 per cent stake while Hotline and Wittis group of Hong Kong hold 25 per cent and 24 per cent respectively.

Konka had on Monday announced plans of investing Rs 500 crore in India for the manufacture of a range of consumer electronic products. Also in the offing was setting up of a R&D facility in the country.

"We have verbally informed them that we are no longer interested in continuing as a partner in the joint venture," said a senior Hotline official.

Konka Electronics director Ronald Zhang, however, said the reports of split in the alliance were not true. "We have not received any communication from Hotline. This is mischief of our competitors," he said, hinting that a Korean consumer electronics company was behind it.

Reacting to Konka's denial of the break-up, Hotline officials said that by denying the rift, the Chinese company is just trying to buy time.

A top executive of Hotline said Konka's attitude towards his company had been "disturbing" right from the beginning. He cited the example of invitation for the press conference on Monday where Konka announced the launch of its products. The invitation did not mention Hotline's name.

"Not only this, we were invited for the launch party held on Monday evening only couple of days before the event. How can they do this to a partner which holds 25 per cent equity stake?" he said.

Sources said Hotline group had always held majority equity stakes in its joint ventures. Hotline group has five joint ventures for different businesses. Hotline wanted to retain a majority stake in its joint venture with Konka but later agreed to a minority holding.

Sources in Hotline said that there were serious differences of opinion between the partners on how to manage the Indian operations. "We have been giving them inputs on how to go about the Indian operations but most of our suggestions have not been heeded to," said the Hotline official.

Konka has been using the assembly facilities of Hotline and using Hotline's good offices for importing material and seeking required government approval, Hotline officials added. Hotline has invested around Rs 1.5 crore in the joint venture, officials said.

Interestinly, Konka has limited the holdings of both the other partners below 26 per cent that is mandatory for moving any special resolution at the board level. As per the joint venture agreement, Konka is to source picture tubes and assembly line for their colour televisions from Hotline.

Hotline officials said the company is not averse to meeting the needs of Konka after the break off.

The Hotline group manufactures picture tubes and components for television and computers. The group has five joint ventures, including one with Korean conglomerate LG Electronics.

Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.