MosChip Semiconductor Technology Ltd, the chip designing company, has decided to exit standard products business.
With the losses accumulating to over ₹100 crore and not-so-remunerative products business, the Hyderabad-based company has decided to shift its focus to custom-made, made-to-order chip business and services.
To fund the growth in the new line of business, the company plans to raise ₹20 crore. But in order to raise funds, it needs to clean its balance sheet and write-off accumulated losses to the tune of ₹110 crore.
With a market cap of just ₹14 crore and scrip faring badly at a little above of ₹3, it hit a kind of cul-de-sac, forcing it dump the standard products business.
“Though we developed about nine million chips in the last 14 years in 20-25 different chips, the scale of the business did not give us volumes. And also we are hit by ups and downs in the semiconductor business,” K Ramachandra Reddy, Chairman and Chief Executive Officer of Moschip, told Business Line .
He claims that the bandwidth of the company in designing chips would help it find easy to switch gears and make chips for public and private firms to suit their specific requirements.
To hire moreThe company, which has about 110 employees, is planning to hire 200 engineers in the next one year. It will also set up a campus to train people in chip designing.
Consequent to the move, the equity share value of ₹10 each will be reduced to ₹2 each as the paid-up capital reduced to ₹9.2 crore from ₹46 crore. There would be no change in the number of shares one holds in the company. It would also use securities premium reserve of ₹66 crore to help write off the accumulated losses.
“Reduction of share capital will help us raise funds and pursue new business focus,” he said.
The audit committee attributed the losses to the extended period of downturn in global economy and recession in the US and Europe.
“Our customers skipped new product introductions which in turn has drastically impacted our sales. We have been incurring losses over the last few years, resulting in accumulation of losses,” it said, giving reasons for the capital restructuring scheme.