• PAGE ONE
• INDEX
• HOME

Tata Engineering `open' to separation of car project

Our Bureau

MUMBAI, Aug. 15

TATA Engineering & Locomotive Company Ltd (Tata Engineering), which registered a loss of Rs 500.34 crore in 2000-2001, is ``open'' to the prospect of separating its car project.

``We are open to the prospect of separating the Indica project,'' Mr Ratan Tata. Chairman, Tata Engineering, said at the company's AGM here on Tuesday, qualifying his response by pointing out that the time to do so would ``preferably'' be when a strategi c partner has been identified for the project.

Planned variants of the Indica include a sedan and a station wagon, while the bigger car `Magna' is due for commercial debut by either end 2002 or early 2003.

While the Indica was exported to Italy and Portugal and the company has been looking at Iran as a potential export market for its vehicles, Mr Tata said: ``We have had discussions for some of our products and for exchange of products with Chinese parties .''

``More than exports, I think what we need to look at over time would be, can we be a global auto company? Can we grow in terms of our growth in other countries also?'' he asked.

However, he said, it will be difficult to do a Tata Steel in car manufacture by emerging a very low cost manufacturer, because in car production, overall efficiencies are additionally impacted by volumes and pricing by vendors.

Mr Tata expressed deep disappointment over the continued absence of sales tax concession in Maharashtra for the Indica project. Ostensibly due to its financial problems, the current State Government has also not approved it.

``I am very sad we did not get the concession. We stand out as the only Indian product without it. But that I am afraid, is life,'' he said.

The company's inventory of finished goods moved up marginally from the Rs 110-crore of March 2001 to Rs 1206 crore by July, while receivables during the same period rose from Rs 612 crore to Rs 788 crore.

This fiscal, Tata Engineering hopes to earn Rs 150 crore from property sale.

Currently, the promoters hold 25.6 per cent equity in Tata Engineering, financial institutions have 40 per cent, DaimlerChrysler has 10 per cent and the balance is with the public.

Mr Tata said the promoters' decision to subscribe to any unsubscribed portion of the company's proposed Rs 979-crore rights issue ``is not with a view to raising promoters' stake but indicates their faith in the company and the issue''.

Nevertheless, he said in reply to a query on take-over threat to Tata Engineering that the company was vulnerable to takeover at the present level of promoters' stake. ``Yes, we are vulnerable. Today, 26 per cent is not a safe level,'' he said.

The company's manpower will be 23,000 once the new round of VRS is over. This year, 1,500 people are expected to avail it entailing an outgo of Rs 80 crore.

Mr Tata maintained that there will be no impact on Tata Engineering from the ongoing restructuring at Tata Finance. ``We have arrangements with other banks and we also have our own hire purchase department,'' he said.

At the AGM, held in the shadow of remarks in the media that he step down owning responsibility for Tata Engineering's loss, Mr Tata said: ``I am quite disappointed with the results of Tata Engineering. There are times when you have to take a view on whet her you are actually the cause of the problem, or you should stand by the company as shareholders have said, and take it through the problem. I have no intention of creating drama or stepping down. But if the shareholders want me to step down or the boar d wants me to step down, I will step down.''

While the gathered shareholders insisted that he continue at the helm (the resolution reinstating him as a director of the company was passed at the AGM), Mr Tata pointed out that against Rs 246 crore of total profit-after-tax (PAT) and an average divide nd payment of Rs 24 per share during 1976-1988, Tata Engineering had made a total PAT of Rs 2,150 crore (including the loss of 2000-2001) with average dividend payment of Rs 53 per share during 1989-2001.

Referring to 2000-2001, the first fiscal when the company failed to pay dividend, he told shareholders: ``The board is conscious of this and will make it up to you in the coming years.''

Name change soon?

Mr Tata indicated that Tata Engineering is likely to undergo a change of name in the future.

While the name - Tata Engineering - was retained in the initial phase of the group's brand revamp exercise in tune with others such as Tata Steel and Tata Chemicals, Mr Tata said the group's intention would be to make Tata Engineering's name reflect its presence in the automobile business.

He said this in reply to shareholders' queries on why the company is not called Tata Motors or Tata Automobiles.

Mr Tata said that in tune with the Tata brand policy, Tata Engineering by virtue of being in loss, will not be required to pay royalty for using the Tata brand.

Pic.: The Magna, Tata Engineering's new offering, on display at the company's annual general meeting held at Mumbai.

Picture by Paul Noronha