Videocon shelves plan to set up manufacturing unit in Russia

Prasanna Upadhyay & Sambit Datta

Mumbai, Nov 4: The Rs 3,244-crore home appliances major, Videocon International Ltd, has shelved plans for setting up a $100 million (Rs 480 crore) unit in Russia to manufacture coloured glass shells for televisions.

According to Videocon International chairman and managing director VN Dhoot: “The Vornech unit in Russia was not feasible for Videocon and the company could not get standard machinery to manufacture the coloured glass shells.”

The finer details of the project had been worked out by the company but it was shelved at an advanced stage. Videocon International had earlier decided to set up a joint venture with the state-owned Russian Electronics Corporation (REC). The unit was supposed to start production in two years’ time and the Russian company had agreed to subscribe to the equity and debt for the project. About five million shells were to be manufactured annually and cater to the demand in the Russian market. Meanwhile, as part of the overseas venture, the company has also set up a wholly-owned subsidiary called Paramount Global Ltd in China at a cost of $2 million. The unit manufactures colour televisions and Internet televisions. Mr Dhoot said: “The unit has already started production and the plant has a capacity of around 1.5 lakh units of Internet televisions per annum.”

The proposed unit has been set up at the Shanghai special industrial area, where only wholly-owned subsidiaries are permitted, subject to 50 per cent export obligation. Videocon International had earlier received sound response on exporting a significant amount of Internet televisions in the Chinese market. This led the company to set up a manufacturing facility in China, which is much cost- effective. The company expects that this new initiative will give a boost to its exports, as the earnings will be added in the balance sheet of the parent company.

As per the agreement, Videocon will have to sell 50 per cent of its goods in China and the remaining has to be exported. The company’s proposed Hyderabad unit for developing technology intensive products is expected to commence in March 2002, said Mr Dhoot. The company has decided to invest Rs 150 crore in the unit, for which the amount will be met through internal accruals.