Confirming this to The Financial Express during an exclusive interview, Punwire managing director Gurpal Singh disclosed that a decision to this effect was taken at a recent meeting of board of directors held at Mohali near here. He agreed that disinvestment was the only hope for revival of Punwire which was in financial crisis with liabilities of about Rs 280 crore.

Another major decision taken for giving a new lease of life to Punwire is the decision by Punjab State Industrial Development Corporation (PSIDC) to offer Rs 20 crore as loan to bail out this Punjab-based company which was once considered a jewel in the crown of PSIDC. Its share was once quoted at Rs 480 but is now in debt trap and needing working capital to execute defence orders in hand worth Rs 150 crore.

The decision was announced at a meeting convened by Punjab's principal secretary (Industries) Ramesh Inder Singh, PSIDC managing director SS Brar, Punwire managing director Gurpal Singh, executive director Ved Parkash and representatives of union who are agitating for release of their salaries. However, Punwire sources maintained that salaries would ``only be released once PSIDC gives the soft loan of Rs 20 crore or agrees to increase its equity by this amount.''

The PSIDC has offered the package so that Punwire could come into production. The industry secretary, however, made it clear that as PSIDC wanted to make sure that it did not lose money, it had imposed certain conditions like an escrow account so that profits are routed through PSIDC, bankers and other creditors and also Punwire also gets some share. uUnder the formula, Punwire would be allowed to ``rotate the Rs 20-crore loan for one year'' so that it is able to execute orders in hand from ministry of defence for supply of strategic equipment.

Gurpal Singh told that the board of directors has taken a decision to go in for ``disinvestment of subsidiaries to the extent of 49 per cent.'' The company has an equity of Rs 160 crore in the seven subsidies it floated in paging, radio trunking and mobile services. The PSIDC was also considering to disinvest some of its stake in the Punwire which presently is 31 per cent. RI Singh, however, made it clear that it would a ``normal exercise as PSIDC disinvests some of its stake in different companies every year.''

He also made it clear that Punwire was neither a Government's company nor a PSU so there was no question of absorbing some of its surplus staff in the Government. The company was one in which PSIDC has share in its equity.

The major flaw with the company which had been making profits since inception in 1979 was that ``it grew too fast and too far geographically.'' The multinationals like Telia of Sweden and CDC of the US which had offered to be joint venture partners backed out later, leaving the company in lurch in 12 states where it had started paging service and 36 cities where it started radio trunking. The Punwire blames shift in telecom policies for the crisis which sent a wrong signal to joint venture partners. Sources say that company was sure to do well in view of Telecom '99 policy which ensures relief in licence fee which was about Rs 40 crore per annum.

The total liability of the company is about Rs 280 crore and disinvestment of subsidiaries and conversion of short-term loans into long ones seems to be the only alternative for Punwire to restore the company back to its past glory.

Ved Parkash told The Financial Express that he had a meeting with secretary (banking) in Delhi recently and he too had agreed to the bail-out formula.