AmEx in talks with Tatas to buyout TFL-AmEx stake

Ujjal K Basu Roy & Raghu Mohan

Mumbai, Dec 6: American Express (AmEx) is in talks with Tata Finance (TFL) to buyout the latter’s stake in their joint venture, Tata Finance-AmEx (TFL-AmEx). TFL and its affiliates have 74 per cent stake with AmEx holding the remaining stake.

AmEx officials were not available for comments, but banking industry sources indicated that talks were on to this extent. While no confirmation could be gathered from the Bombay House, TFL sources said a decision to exit from TFL-AmEx has been taken in-principle and that this would go to the board once something concrete emerged, adding however, that no progress had been made as to whom the TFL stake would be sold to nor about the price.

TFL-AmEx had started out with a paid-up capital of Rs 15 crore. The company is in the money changing and forex services business and operates in both the retail and the wholesale segments. The company also had plans to to set up offices in almost 35 locations in 21 cities. The travellers cheques and payments business is done through AmEx Travel Related Services.

After the financial troubles at TFL, the Tatas have been looking for a strategic partner in TFL. Moreover, they have decided to quit what they see as ‘non-strategic businesses’. The company has been in talks with several players for offering a stake in it, and the names doing the rounds include GE and Citigroup.

TFL has now gone in for a complete makeover. The restructuring exercise encompasses recasting the board, undertaking a thorough business review and a fresh fund infusion of as much Rs 250 crore.
TFL has also decided that it would stick to its core business, auto financing. It will also review all its peripheral businesses like credit cards with AmEx; and Tata Housing, given that these are capital guzzlers.

Sources also said the present round of capital recast at TFL is a clean-up act warranted by the past goings on at the company, and a precursor to a strategic, if not outright sale, to a potential buyer.

TFL new chairman Ishaat Hussain had earlier confirmed that a strategic partner would be looked at, but did not reveal names.

TFL reported a whopping Rs 395.56 crore net loss for the fiscal ended June 30, 01 compared to a net-profit of Rs 56.77 crore last fiscal, owing to a one-time extra-ordinary provision of Rs 315 crore on deals relating to loans to and investments in its problem affiliates.

Other than Mr Hussain, who has taken over from Fredie Mehta, the other members of the new board are Tata Sons vice-chairman NA Soonawala; Tata Industries managing director Kishore A Chaukar (who stayed on); executive director Francis J DaCunha and director U Mahesh Rao, formerly with GIC. Others who were replaced are Mr BL Passi, Mr B Ramakrishna and managing director Subodh Shah. The hunt is now on for a new MD.