Tata Electric Companies Drop Merger Plan

The Tatas have dropped their plan to merge the three Tata Electric Companies Tata Power Company, Andhra Valley and Power Company and Tata Hydro-Electric Power Supply Company. Instead, the operations of the three companies are proposed to be synchronised by working out a common profit and expense-sharing formula.

According to senior Tata sources, Tata Power Company will have a 50 per cent share of profits and expenses under the new formula. Andhra Valley and Power Company will have a 30 per cent share, while Tata Hydro-Electric Power Supply Companys share will amount to 20 per cent.

Senior Tata sources said no merger is being contemplated now and the three companies will retain their individual identities. The merger has been ruled out as it would have entailed huge expenditure in stamp duties.

 

``The value of the companies and their assets is very high and the stamp duty costs that the merger would have involved would have been phenomenally high, explained the sources.

The new strategy, which has been worked out to streamline operations and infuse functional co-ordination between the three Tata Electric Companies (TEC), also envisages the appointment of a common managing director for all the three companies. At present, Tata Electric chairman H N Sethna handles all the day-to-day operations in the absence of a managing director.

TEC has also decided that the board meetings of the three companies will be held on the same days, although separate accounts will be maintained.

The three companies reported a combined turnover of Rs 2,344.72 crore in 1996-97. The cumulative net profit was Rs 229.77 crore. Tata Powers turnover for the year was Rs 1,174.39 crore, while Tata Hydro and Andhra Valleys turnover stood at Rs 469.48 crore and Rs 700.85 crore respectively.

The net profit of Tata Power, Tata Hydro and Andhra Valley was Rs 114.05 crore, Rs 69.44 crore and Rs 46.28 crore respectively.

TEC has now decided to concentrate on custom-made power stations. The power major will be looking at projects with generation capacities between 25 mega watts (mw) and 100 mw, said Sethna.

TEC is currently planning to set up captive power generation plants for Associated Cement Companies and Indian Aluminium company. The Tata power major has also bid for a project to set up a 400 kv transmission line from Mangalore to Bangalore. TEC has tied up with Tennessee Valley Authority of the US and Eskom of South Africa for this project.