Tatas to review all group firms’ subsidiaries

Our Banking Bureau

Mumbai, Oct 31: The Tata group will take a strategic review of the functioning of the subsidiaries of all group companies, in the light of the fiasco at Tata Finance with regard to its erstwhile subsidiary, Niskalp Investments.

Said Tata Finance’s new chairman, Ishaat Hussian, “We will undertake a review of all subsidiaries of group companies and see whether they need to be there. Personally, I am not in favour of the subsidiary route”.

It was pointed that subsidiaries were deemed necessary in a period when the Monopolies and Restrictive Trade Practices (MRTP) Act was in vogue. Companies used the subsidiary route to circumvent the MRTP Act. “With the repeal of this Act, and in line with the principles of good corporate governance, we will have to review these subsidiaries. And these include those which are already in existence and those that are to be set up as well,” Mr Hussain noted.

The Tata group, with its chaebol like interests across industries, has scores of subsidiaries within the fold of its many companies.

“With more emphasis on consolidated balance-sheets, we see it as another reason to do away with these subsidiaries. We will see if the business carried out by these companies cannot be done in the main company itself”, Mr Hussain said.

He pointed out the fact that subsidiaries also opened up avenues to carry out transactions that may finally impact the main company like in the case of Tata Finance and its erstwhile arm, Niskalp Investments.

On Wednesday, Tata Finance reported a loss of Rs 395.56 crore for the fiscal ended June 30, 2001. This was due to a one-time extra-ordinary provision of Rs 315 crore relating to transactions in respect of loans to and investments in some of the affiliates undertaken by the erstwhile management which have recently come to the attention of the board as compared to a net profit of Rs 56.77 crore for the last fiscal ended June 30, 2000. The company also reshuffled its entire board and inducted a new chairman, Ishaat Hussain, who will replace Fredie Mehta.