Tatas To Dilute Refractories Pie, Seek Mnc Ally

The Tata group, as part of the ongoing restructuring of flagship Tata Steel's subsidiaries, has decided to dilute its stake in Tata Refractories and rope in a multinational as a joint venture partner.

Senior group officials confirmed that Tata Steel was open to the idea of ceding management control to a partner and would eventually dilute stake in Tata Refractories to 26 per cent from 51 per cent at present.

The process of scouting for a partner will begin soon, they added.

The decision was taken as the group realised it will not be able to add much value to the company's operations in terms of technology and future investments. The Tatas believe that an upturn in the industry could enable Tata Refractories become a major point for a multinational's operations in the south-east Asian region, but the investments required for that could be large.

 

Tata Steel would continue to be a major buyer for the company.

The Tatas also have management control in another refractories company, Ipitata Refractories, which has been rechristened Nilachal Refractories.

The Orissa-based company is in a major financial crisis and has been put on the block six months back, but no buyer has been identified yet.

The Tatas had earlier been considering merging the two refractories companies to make them a stronger business entity, but the downturn in the industry has made running Nilachal Refractories financially unviable.

The downturn in the industry had caused Tata Refractories' turnover to decline in the 1998-99 fiscal to Rs 218.34 crore, but its net profit rose marginally to Rs 4.85 crore. The company has outstanding debt of around Rs 78 crore.

The review of operations of Tata Steel and its subsidiaries had begun two years back. The group has also identified TRF, formerly Tata Robbins Fraser, as the flagship of the engineering subsidiaries, and will merge four other engineering companies into it.

The Tatas have also sold the flagship's cement division for Rs 550 crore to the French major Lafarge, and its entire 40 per cent stake in Tata Timken in favour of the US-based partner.