Mumbai, July 11: Tata Finance has decided to convert interest-free loans worth Rs 300 crore taken from promoters into equity shares on a preferential basis.
The beleaguered non-banking finance company of the Tata group discovered a big hole in its balance-sheet after investments in technology stocks made under former chairman Dilip Pendse soured. The losses came to light after he left the company under a cloud. The Tatas are still pursuing the case against Pendse for his alleged role in the travails of Tata Finance.
After the crisis, the Tatas poured Rs 300 crore to mend the books so that Tata Finance could meet capital adequacy norms stipulated by the Reserve Bank of India, besides paying fixed deposit holders and other creditors.
The board today approved the stake-for-loan proposal under which equity shares of Rs 10 each — for a value of Rs 300 crore — will be issued at a price to be determined in accordance with norms laid down by Sebi. The deal has to be cleared by shareholders and regulators.
The allotment will help Tata Finance meet the minimum net owned funds (NoF) requirements. It will also help it attain the capital adequacy stipulated under Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 1998, a company release said.
The company has restructured its core operations during the past year. Recently, it hived off its home finance arm to IDBI and its credit card business to ICICI.
Tata Power has invested Rs 1,115 crore in the group’s telecom initiatives. This year alone, it pumped Rs 25 crore into Tata Teleservices, Rs 115 crore in Tata Teleservices Maharashtra, (formerly Hughes Tele-com) and Rs 212 crore in Panatone Finvest, the special purpose vehicle the Tatas floated to acquire VSNL’s equity.
Its investments stand at Rs 500 crore in TTSL, Rs 115 crore in TTML and Rs 500 crore in VSNL (through PFL). “The company will bring long-term benefits of participation in an integrated telecom value chain to shareholders,” it added.