Tata Motors, the Mumbai-based car and truck maker, today announced that it had sold 20 per cent stake in Telco Construction Equipment Company (Telcon) to Japan-based capital goods major Hitachi Construction Machinery for Rs 1,159 crore.
Consequently Telcon, which had generated a turnover of more than Rs 2,100 crore last financial year, would no longer be a subsidiary of Tata Motors, with the ownership rights now being in the hands of the Japanese company. Tata Motors’ holding has declined to 40 per cent, while Hitachi’s stake has increased to 60 per cent.
Bangalore-based Telcon is India’s biggest manufacturer and supplier construction equipment and the unlisted company has been valued at Rs 5,795 crore. Standard Chartered Bank and ABZ Partners acted as financial and legal advisors to Tata Motors in the deal.
Tata Motors had clarified earlier that it was exploring all its options to unlock value at some of its subsidiaries and group companies to raise capital. This is an attempt by the company to reduce its debt, which currently stands at Rs 23,100 crore on a consolidated basis.
The company had recently announced a conversion of its bonds worth $431 million into shares about a year before they mature, although they could lead to a heavy dilution of the equity base. The company is aiming for a debt to equity ratio of 1:1, which currently stands at 4:1.
Telcon has two facilities in India, one located at Dharwad in Karnataka and the other at Jamshedpur in Jharkhand. Its third plant in Kharagpur, West Bengal, is spread across 60 hectares with additional facilities for a vendor park and has commenced commercial production during the third quarter.
Telcon makes construction equipment such as backhoe loaders, excavators, off-highway dump trucks, wheel loaders and large mining shovels.