Mumbai, Sept. 30: Tata Finance (TFL) could sell non-core assets and subsidiaries, including its credit card and housing finance divisions, to shore up its capital adequacy to the level fixed by the Reserve Bank (RBI).
The company has promised RBI its capital adequacy ratio will rise to 12 per cent by March 2003 from a little under 5 per cent at present. Chairman Ishaat Hussain told reporters after the annual general meeting (AGM) here today that the Tatas would invest Rs 100 crore by December, in addition to the Rs 200 crore they have already pumped recently. Since that would not be enough to tone up its financial muscle, TFL would have to look at shrinking its asset base, apart from selling off its real estate and securities.
Hussain said negotiations with a handful of companies to sell the credit card division are in an advance stage. Explaining the decision to quit this business, he said there were few options left for the cash-strapped company, which battled card-issuing commercial banks. With only 70,000 customers, the firm was pitted against leading banks with 1.5 million card-holders.
The planned divestitures are part of a drive to focus on auto financing, including commercial vehicles, cars and two-wheelers. Fresh loans under corporate finance have been stopped, while a proposal to fund a wind-mill project was turned down. Licences for merchant banking and underwriting have not been renewed, though the company did raise a modest sum of Rs 5 crore by selling stake in Tata Finance Amex Ltd.
The AGM did not turn out to be stormy, as many had feared. Many shareholders expressed confidence in the present management, but there was a disgruntled section that called for the company to be wound up or merged with a stronger entity in the Tata fold.
Tempers frayed when a shareholder clamoured for a “post-mortem” of balance-sheet, while another blamed the former chief and the previous board of directors for the mess by hollering that “titans have failed us”.
Hussain sought to reassure shareholders, saying the company’s “boat is steady” and that its operations were improving. However, he emphasised a clean-up of the balance-sheet — a growing demand — could take time.