Suffers Rs 396-cr loss; Tata group to infuse fresh capital

Tata Finance goes for complete makeover, board reconstituted

Our Banking Bureau

Mumbai, Oct 31: Tata group’s troubled finance company, Tata Finance Ltd, which has been in the thick of controversy relating to questionable investments by its erstwhile subsidiary, Niskalp Investments, has gone in for a complete makeover. The restructuring exercise encompasses revamping the company’s board, undertaking a thorough business review and infusion of fresh capital of Rs 250 crore.

The company on Wednesday unveiled its annual results for 2000-01, reporting a whopping Rs 395.56 crore net loss for the fiscal ended June 30, 2001 compared to a net-profit of Rs 56.77 crore in the preceding fiscal, owing to a one-time extra-ordinary provision of Rs 315 crore on transactions relating to loans and investments in its problem affiliates.

Tata Sons finance director Ishaat Hussain has taken over as the new chairman from current incumbent, Mr Fredie Mehta. The other members of the new board are Tata Sons vice-chairman NA Soonawala, Tata Industries managing director Kishore A Chaukar (who stays on), executive director Francis J da Cunha and director U Mahesh Rao, formerly with the General Insurance Corporation. Others who were replaced are, Mr BL Passi, Mr B Ramakrishna and TFL’s managing director (MD), Mr Subodh Shah. The hunt is now on for a new MD.

Said Mr Hussain: “The Tata group is committed to supporting the restructuring exercise being undertaken at TFL. The board has stepped down, taking constructive moral responsibility.”

The restructuring of the company’s business includes refocusing back on its core business of auto finance and reviewing capital-intensive ones like the credit card and housing finance activities.

Plans are also afoot to find a strategic partner for the company. The names doing the rounds as possible partners are GE Caps and Citicorp. Peripheral activities of the company are a co-branded credit card offering with American Express and debt business with Toronto Dominion Bank.

Among the figures for the full year, extraordinary items and contingencies include provision for exposure to Niskalp Trading and Investment Company of Rs 266.67 crore, provision for exposures in associate companies of Rs 44.04 crore and provision for estimated permanent dimunition in the value of long-term investments of Rs 24.97 crore.

TFL’s net loss before extraordinary one provisioning and contingencies stood at Rs 80.21 crore. The company has also reported a net loss of Rs 17.27 crore for the first quarter ended September 30, 2001 as against a profit of Rs 8.52 crore for the same period last fiscal.

The paid-up equity share capital of the company stands at 45.48 crore. The total paid-up share capital stood at Rs 263.37 crore (Rs 208.03 crore). Reserves, excluding revaluation reserve, stood at a negative figure of Rs 122.10 crore (Rs 285.38 crore). Earnings per share (basic) stood at a negative figure of Rs 91.96 (plus Rs 9.09).

TFL had lent about Rs 469 crore to Niskalp through the inter-corporate deposit (ICD) route. Out of this, TFL has provided for Rs 205 crore and also written down the equity share capital of Niskalp of Rs 57 crore.

Under the financial restructuring plan being drawn up, the Tata group will pump in Rs 250 crore. This will be in addition to the Rs 90 crore subscribed to by Tata Industries to the company’s rights issue and an additional Rs 100 crore already extended by way of ICDs by Tata Sons.

Post infusion of the the additional Rs 250 crore by way of capital, the company’s capital adequacy will meet the regulatory norm of 12 per cent. It is currently at around 5 per cent.