Telco to use capital inflow to retire high-cost debt
Economic Times — June 30, 2003

New Delhi: Tata Engineering, which has sought shareholder approval to increase its share capital by Rs 500 crore, will use the money to prepay its remaining expensive debt.

Speaking to ET, company executive director Praveen Kadle said, "It is an enabling resolution which will allow us to retire the Rs 500-odd crore of expensive debt that we still have. It will help us make use of the low interest rates ruling both in India and overseas."

The company can afford to do that particularly because its product development expenditure will be adequately covered by the receipts of the warrants issued along with the convertible and non-convertible debentures, which are up for exercise since June 6 and will be open till 30 September ‘04.

Telco had raised Rs 672 crore from its rights issue of simultaneous but unlinked convertible and non-convertible debentures in December ‘01. At a conversion price of Rs 120 per warrant, full-subscription would raise another Rs 307 crore "which would go towards new product development expenses including the new CV platform under development," Mr Kadle said.

Last fiscal, Telco restructured its debt portfolio to cut costs of borrowing and prepaid Rs 505 crore of expensive debt.

It has also restructured another Rs 200 crore of debt at lower interest rates. Telco raised Rs 120 crore from privately-placed debentures in the Indian market last year to fund the debt prepayments.

Telco also intends to offload its stake in non-core businesses where its equity exposure is less than 20%, Mr Kadle said. However, there are no similar plans for its subsidiaries, most of which have turned around this year including Tata Technologies, HV Transmissions and Minicar India. "Even Concorde, the south-based auto retail outfit which Telco bought out from partner Jardine Matheson for Rs 20 crore, has turned in a Q4 profit and showed losses in the earlier quarters due to fiscal restructuring," Mr Kadle said.