Tata Motors sells 20% in Telcon to Hitachi

Written by fe Bureau | Mumbai | Updated: Apr 1 2010, 04:41am hrs
Tata Motors on Tuesday said the company has sold an additional 20% stake in Telcon Construction Equipment Company (Telcon) to its joint venture partner Hitachi Construction Machinery Company (Hitachi) for a consideration of Rs 1,159 crore. After the stake sale, Tata Motors will hold 40% in Telcon, while Hitachi will hold 60%. Shares of Tata Motors closed at Rs 756.30 on the BSE on Tuesday, up 2.25%. Standard Chartered Bank and AZB Partners acted as financial and legal advisors to the transaction.

In 1999, Tata Motors had spun off its construction equipment business as Telcon, a fully-owned subsidiary. The company supplies a wide range of construction equipment such as excavators, mining shovels and dumpers to the construction and earth-moving sector. Tata Motors had earlier divested 20% each in 2000 and 2005 in Telcon, in a bid to help it gain access to newer technology and processes.

The stake sale is in line with Tata Motors debt-cutting exercise. Consolidated debt on Tata Motors books as on December 31, 2009 is around Rs 23,100 crore.

C Ramakrishnan, chief operating officer, Tata Motors had said that the company will look at options to reduce debt and de-leverage through divestments. The company said its debt-equity ratio has come down to 4:29 in the quarter ending December 31, 2009.

In 2008-09, Telcon reported a gross turnover of Rs 2,130 crore and a net profit of Rs 85 crore. The company has manufacturing facilities at Jamshedpur, Dharwad and Kharagpur. Telcon exports to countries in Asia and Africa, and has two Spanish subsidiaries - Serviplem SA and Comoplesa Lebrero SA. Last year, the company sold some stake in group firm Tata Steel to pay down debt for its Jaguar-Land Rover acquisition. It also looking at selling a stake in its financing unit Tata Motors Finance.