Tata Chem plans Spore holding co to park assets

Written by MG Arun | Mumbai | Updated: Jul 23 2012, 06:23am hrs
Tata Chemicals, the worlds second-largest soda ash manufacturer and Indias largest branded salt maker, is creating a holding company based out of Singapore to park all its natural resources in the US, the UK and Africa, joining conglomerates Essar Group and Vedanta Resources in creating global arms to raise money to fund expansions and acquisitions both in India and abroad.

The entity Tata Chemicals Asia Pacific will act as a global headquarters for the R14,000-crore Tata Chemicals, chalking out all its future international marketing and business development, research and development, and even replicate a larger model of its latest venture into the nutraceuticals space, highly placed sources said. It will also be a channel for all its soda ash exports out of India, Kenya and the UK.

The entity, in future, could also be listed in Singapore through an initial public offering or seek investments through a strategic investor. The Singapore Economic Development Board is close to giving Tata Chemicals Asia Pacific an international headquarter status. The India businesses, however, will continue to remain under Tata Chemicals.

When contacted, PK Ghose, executive director and CFO, Tata Chemicals, said, We are expecting a letter from the Singapore government in two weeks time.

An international headquarter status will bring the entity under a 5% tax regime for all of Tata Chemicals' future investments. "We are preparing a five-year plan with the Singapore Economic Development Board, said Ghose. He declined to comment on a likely IPO of the Singapore entity, stating that it was too early to be decided upon now, and that the company cannot give future projections as it was in a silent period ahead of its results announcement.

Tata Chemicals, which has three major businesses chemicals (including soda ash), fertilisers and consumer products (like branded salt, pulses and water purifiers) has now moved its soda ash business into the fold of the holding company. Soda ash is used to make glass, soaps detergents, pulp and paper.

This includes Tata Chemicals Magadi (formerly Magadi Soda Company), Africa's largest soda ash manufacturer and Kenya's leading exporter, Tata Chemicals Europe, which in 2011 acquired British Salt, UK's leading manufacturer of pure dried vacuum salt products, and Wyoming-headquartered Tata Chemicals North America, formerly known as General Chemical Industrial Products, which Tata Chemicals acquired it in 2008. The company makes 2.6 million tonnes of soda ash in the US.

The natural resources assets in fertilisers like US potash miner EPM Mining Ventures, which Tata Chemicals bought in 2011, will be moved under the holding company at a later date.

Tata Chemicals, which has a debt of around Rs 7,000 crore on its books, wants to pare it down. There is a mismatch between domestic and overseas operations, because all overseas acquisitions have been done with Indian money, with a high interest component, said a person aware of the development. The company wants to slowly bring that down. The Singapore holding arm will help raise resources for global operations as well as help the company pare its debt, he added.

Creating a holding company in Singapore is primarily for tax gains, since the government has a treaty with India, said a Mumbai-based banker. Much of the global funding can happen through this company.

Tata Chemicals had a net profit of Rs 1,040 crore on revenues of Rs 13,894.30 crore in the fiscal ended March 2012.

"Holding companies can help raise money for growth," the banker added.

London-listed Essar Energy is the holding company for the Essar Groups energy business, and had raised $1.9 billion through an IPO on the LSE in 2010. Vedanta Resources, also listed in London, has businesses located in India, Africa, Sri Lanka, Australia and Ireland.