Electrolux to invest $31 million in indebted India arm

Sweden's AB Electrolux, the world's No 1 consumer appliance maker, will invest $31 million in its loss-making Indian arm, which is weighed down by debt of over double that amount, the unit said.

Electrolux Kelvinator Ltd, India's second-largest refrigerator maker, said on Friday its shareholders had already approved a proposal to route the investment through a preferential issue.

"The funds will be used to retire a significant portion of the debt and the rest is to fund capital expenditure," Electrolux Kelvinator Chairman Andrew Bentley told a news conference, adding that the Rs 1.5 billion would come in by the year-end.

He said the investment reflected AB Electrolux's commitment to the Indian market.

"I see Asia Pacific as the leading region in terms of future growth potential," Bentley said. "The idea of the recapitalisation is to restore the balance sheet to good health."

Electrolux Kelvinator, which has debt totalling Rs 3.5 billion, posted a net loss of Rs 540 million in the nine months to September on net sales of Rs 3.7 billion.

The company, 76 per cent owned by its parent, has a near 23 per cent share of India's 2.7 million units a year refrigerator market, which is expected to grow 6-7 per cent in 2003.

It also has a 2.5 per cent share of the washing machine market, which is likely to stagnate this year.

Electrolux competes with the Indian arms of South Korea's Samsung Electronics and LG Electronics and domestic firms such as Videocon International in the cutthroat Indian white goods market.

Bentley said the company also planned a rights issue of Rs 2 billion early next year, after the preferential allotment, but the market watchdog was yet to approve it.

The size of the rights issue was earlier Rs 2.5 billion, but company officials did not say why it had been reduced.