Bangalore: An Indian company that launched a low-cost e-mailing machine is facing hard times with funds drying up and multinational and local firms eyeing it for a possible takeover.

iStation, launched a year ago with the tag of the "poor man's e-mail" in India's IT capital of Bangalore, is a smaller version of a laptop from which one can send and receive electronic messages.

Inabling Technologies Pvt Ltd, which makes the iStation, got an initial venture capital funding of $ 2.5 million from investors and two Indian venture firms.

"The firm went through a tough cycle of learning," said Narasimha Prabhu, the chief technology officer of Inabling Technologies. "There was an expectation of a second round of venture capitalist funding in September."

"Much to our dismay the September 11 attacks happened. It messed up our schedules," Prabhu said. "There was a plan to go for a nationwide launch in the June-July period this year. That did not happen and marketing plans had to be altered."

About 1,000 iStations, costing 7,990 Rupees ($ 163) a piece, have been sold in three Southern Indian states: Andhra Pradesh, Karnataka and Tamil Nadu.

The users are given an e-mail identification and password and they can use a normal telephone line to connect iStations to the company's servers in the three Indian states. The device supports three Indian Southern languages.

"Now investors are very shy to invest in a greenfield venture like ours. To sell the product in the market you need a big retail network. Currently, we do not have the funds to set up one," Prabhu said.

"Even though there are new customers wanting to buy our machines from other states we cannot support them," he said. "One needs a lot of financial muscle to get into the retail markets."

Due to the technology meltdown and turmoil in global markets the company had to sack 120 employees to sustain itself. Presently, it employs 50 people.

"All the founders and investors knew we had a product which was affordable and very easy to use. But the market sentiment went bad and we took a bad blow," Prabhu said.

The state government of Karnataka, in a bid to support the product, has installed 120 iStations in government departments.

Prabhu said his firm was in talks with new investors to inject the much-required cash into the company.

"The talks are fairly promising. It is still on. All that we need is about $ 1.5 million. A huge demand for the product still exists. Enquiries are still coming in from the United States and even from African nations," he said.

A patent for the product has been already filed two years ago.

Inabling Technologies is now planning to outsource marketing to private firms to enable it to focus on research and development to add new features to the product.

"With ramping up the staff strength significantly we can meet our needs," Prabhu said.

He said three multinational companies, including two Indian software and telecommunication firms, were eyeing Inabling Technologies.

"That option is still open. All the three companies are holding talks. But if the second round of funding comes through then I think we are safe," Prabhu said, adding he needs to sell only 200 devices every month to make a profit.

"At the end of the day after spending sleepless nights developing the product I feel like an Indian carpenter who labours throughout the day and earns only a meagre fraction when his product is sold in the market for a fortune," he said.