Zenith may log out of PC biz

KOLKATA: Zenith Computers, one of India’s first domestic PC makers, is planning to sell its laptop and desktop business to focus on the group’s software business.

Zenith has decided to demerge the PC business into a separate entity, where it wants to sell stake to a strategic investor. It is in talks with the Kolkata-based, Rs 918-crore RP Infosystem, which sells computers under the Chirag brand, two sources close to the development said.

As part of the transaction, Zenith plans to sell its PC manufacturing plant at Goa as well as its brand name. Both Zenith and RP Infosystem have recently signed a non-disclosure agreement as part of the due diligence process. While Zenith has valued its PC business at around Rs 160 crore, RP Infosystem plans to appoint PricewaterhouseCoopers for undertaking the valuation and act as an advisor for the deal, sources said.

When asked about the deal, Zenith Computers chairman and managing director, Raj Kumar Saraf denied the development. “There are no such plans to demerge the PC business or sell it to anyone. And I have never met anyone from RP Infosystem or know anything about them,” Mr Saraf said.

RP Infosystem chairman Kaustuv Ray, too, declined to comment. “All I can say is acquisition is a key part of our strategy. We have already done few such deals and are continuously evaluating suitable opportunities,” he said.

While Raj Kumar Saraf and his family hold 54.37% stake in Zenith Computers, the promoters plan to demerge the PC business and transfer all related assets and liabilities to the new company, where it will offer controlling stake.

Zenith has appointed Mumbai-based investment banking and corporate advisory firm Singhi Advisors for the deal.
While HCL is the largest domestic PC brand, the second, third and fourth slot varies between Zenith, Wipro and Chirag.

If RP Infosystem manages to clinch the deal, it will become the number two domestic player with around 6% market share. Apart from this, the deal will help RP Infosystem to tap Zenith’s massive distribution and corporate client base in the West.

According to Zenith’s website, the company’s corporate customer base includes Intel, Microsoft, Tata Group, Godrej, Taj Hotels, Kotak, HDFC, Mahindra and Mahindra, Toyota, Colgate, State Bank of India, ICICI Bank, ITC, Castrol and IBM. Zenith currently employs more than 630 people and its Goa plant has a capacity for two lakh units.

Zenith Computers’ revenue and net profit for fiscal year 2009-10 stood at Rs 277 crore and Rs 2.1 crore, respectively. Shares of Zenith Computers on Thursday rose 1.75% on the BSE and closed at Rs 32. On the NSE, Zenith Computers closed at Rs 32.10, up 1.74%.