Tata Finance is looking at selling its investment of Rs 18 crore (Rs 180 million) in Tata Motors (formerly known as Tata Engineering) to other Tata group companies as part of its restructuring exercise.
The move could be a windfall for Tata Finance based on the improved performance of Tata Motors and the upward movement of the scrip.
Tata Finance had purchased Tata Motors shares at Rs 228 per share. It has a total investment portfolio of Rs 80 crore (Rs 800 million) of which around Rs 30 crore (Rs 300 million) is in Tata Home Finance, which is being sold to the Industrial Development Bank of India.
Niskalp Investments, a subsidiary of Tata Finance, also has an investment portfolio of around Rs 40 crore (Rs 400 million). The other major investments by Tata Finance within the Tata Group, include Rs 18 crore (Rs 180 million) in Tata TD WaterHouse and also in Tata Share Registry.
"As part of our restructuring strategy we will be running down our investment portfolio. We will be selling our stake in Tata Motors to other group companies, which could include Tata Sons, holding company of the group.
"We will not sell the shares of Tata Motors to outsiders. The purchase price of the shares was at Rs 228 which is near to that of the current price,' said Tata Finance executive director F J da Cunha.
The company will also be selling down properties in prime locations in Mumbai, Pune etc. Tata Group companies had recently invested around Rs 300 crore (Rs 3 billion), which will be converted into equity. Post conversion the stakeholding of Tata Group would jump to around 85 to 88 per cent from the current holding of 65 per cent.
With this the capital adequacy ratio of the company would be at around 16.5 per cent. Of the Rs 300 crore which was pumped in Tata Sons had subscribed to Rs 160 crore (Rs 1.6 billion) while Tata Industries invested the remaining Rs 140 crore (Rs 1.4 billion)," said da Cunha.
With the group's holding touching close to the 90 per cent level, da Cunha stated that currently there is no move to delist the company from the bourses.
Tata Finance has also affected a turn around in the first quarter of the financial year ended June 30, 2003, with a net profit of Rs 1.21 crore (Rs 12.1 million) as against a net loss of Rs 9.76 crore (Rs 97.6 million) the previous year.
The company had sold the forex business, to American Express, the credit card business to ICICI Bank and signed a share purchase agreement for sale of Tata Home Finance. The company has also been securitising its asset portfolio.
In the last fiscal ended March 2003, the company had securitised Rs 300 crore (Rs 3 billion) of assets while in the first quarter of this fiscal it had securitised Rs 150 crore (Rs 1.5 billion).
The assets of the company have gone down from Rs 2,870 crore (Rs 28.7 billion) in June 2001 to Rs 1,800 crore (Rs 18 billion) in the quarter ended June, 2003.