Tata Motors to sell 20 per cent stake in Telcon to Hitachi
26 Mar 2010
India's largest vehicle manufacturer by revenue, Tata Motors, is divesting a third of its stake in the construction equipment-making subsidiary, Telcon to Hitachi, its joint venture partner in Telcon, for Rs1,000 crore.
Tata Motors, currently holds a 60-per cent stake in the Bangalore-based company. It will offload 20 per cent to Hitachi Construction Machinery, which currently owns the balance of 40 per cent, according to financial news portal VCCircle.com.
Telcon, India's largest manufacturer of construction equipment is valued at Rs5,000 crore according to the deal. The deal is expected to be finalised in 30 days with a term sheet already signed. According to a Tata Motors spokesperson, the companu had from time to time indicated its strategic intent on divestments to de-leverage its balance sheet and as and when these are concluded the company would make appropriate announcements.
Picking up a 20-per cent stake in the company in 2000, Hitachi raised it to 40 per cent in 2005. It has three members on the company board. When the deal is finally signed it would mean the transfer of the company's ownership to the Japanese giant.
Earlier, Tata Motors had said it would continue to explore opportunities for unlocking value in some group companies by way of measures like selling of stakes, to reduce the debt on its books, which exceeds Rs23,000 crore on a consolidated basis.
Telcon operates three facilities in India, at Dharwad in Karnataka, Jamshedpur in Jharkhand and Kharagpur in West Bengal. Its 60-hectare Kharagpur plant, housing additional facilities for a vendor park, commenced commercial production during the third quarter.
The company makes a line of construction equipment including backhoe loaders, excavators, off-highway dump trucks, wheel loaders and large mining shovels.
The company sold 5,194 machines in the last financial year which was down nearly 33 per cent over the corresponding year when the company sold 7,698 units. The company's turnover dropped 22 per cent to Rs2,143 crore in the same period as against Rs2,735 crore earlier with net profit falling to Rs85 crore as against Rs324 crore.
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