Tata Motors has identified subsidiaries and joint ventures it plans to exit in a bid to deleverage its balance sheet and make itself agile and future-ready. The exit from non-core businesses is part of a larger strategy being espoused by Tata Sons Chairman N Chandrasekaran.
As part of the plan, it will put up assets and liabilities of Tata Technologies, TAL Manufacturing Solutions, company’s assets related to defence business and investment in Tata Hitachi Construction Machinery up for sale.
While the process of selling the defence business to a wholly-owned subsidiary Tata Sons is under way, investments in Hitachi and Tata Technologies and stake in Tata Steel “are held for sale”. These will be done once the company gets a good price, said P B Balaji, chief financial officer, Tata Motors Group, on the sidelines after company’s fourth quarter earnings.
Last month, the firm said it was selling the defence and aerospace business to group entity Tata Advanced Systems in a bid to unlock value. The non-core defence business sale excludes vehicles made for civilians. According to the deal, Tata Motors will receive an upfront consideration of Rs 1 billion adjusted for capital expenditure incurred and changes in working capital in the intervening period until closure date.
It’s construction machinery business is on the company’s radar now. “We are in conversation with Hitachi. We want to sell the business back to Hitachi. The company also wants to grow the business,” he said. The business, he added, has done exceedingly well this year owing to boom in the construction sector. “We believe it is the right time and in the best interest of that particular JV,” said Balaji.
The company is also in the final stages of exiting Tata Technologies. “We completed the transaction earlier this year and decided to pull off as both parties were not comfortable,” said Balaji, adding it is a business that will do far better under a bigger scale. “We are very clear where we want to invest money in. Every rupee we spend needs to give us results,” he said.
The firm pulled out of the 43-per cent stake sale process with Warburg Pincus last year in a deal that was valued at Rs 23.2 billion. Meanwhile, the firm will combine businesses with similar capabilities, he said citing an instance of TML Drivelines. On April 5, the National Company Law Tribunal approved the merger of TML with Tata Motors.
On the time frame within which the firm wants to exit Hitachi JV, Balaji said, “Tata Motors is not on a ‘fire extinguisher situation’ and wants this to be done strategically for the benefit of that particular asset.”