Government clears decks for Indian Iron and Steel Company (IISCO) - Steel Authority of India (SAIL) merger

16th June 2005: Cabinet today cleared the decks for merger of PSUs IISCO and SAIL, authorising Ministry of Steel to initiate the process after getting approval of the Board of Industrial and Financial Reconstruction (BIFR). "Cabinet today authorised the Ministry of Steel to permit SAIL to initiate the process of merger of IISCO with the steel giant after taking approval of BIFR," Union Finance Minister P Chidambaram said after a cabinet meeting chaired by Prime Minister Manmohan Singh. This, he said, would ensure availability of high quality iron ore to SAIL's steel plants.

"With SAIL's financial and managerial capabilities and availability of potential with IISCO mines, collieries, large infrastructural facilities and good work culture, there would be greater synergy for capacity expansion and technological upgradation of the plant," he said. Board of Directors of both SAIL and IISCO has already given in-principle approval to the merger.

IISCO is currently a SAIL subsidiary and after years of being in the red, made a profit of Rs 270 mn and has reported a provisional profit of Rs 400 mn during 2004-05. IISCO, established in 1918, is one of the oldest steel plants in country, was declared sick in 1994 and brought under the purview of BIFR. Subsequently, industrial development bank of India (IDBI) was appointed the operating agency to examine its viability and to formulate a rehabilitation scheme for the company.

Government took over the then privately-owned IISCO in 1972 and its shares were transferred to sail in 1978 by an Act of Parliament. Owing to old machinery, obsolete technology and lack of capital inputs, IISCO's performance over the years has been far from satisfactory. The financial and business restructuring package approved by the cabinet on February 15, 2000 envisaged waiving of loans advanced to sail from steel development fund to a value of Rs 5,073 crore and Rs 381 crore from the government.

The waiver resulted in writing down of sail's assets to the extent of Rs 3,001 crore and loans advanced to IISCO from sail to the extent of Rs 1,566 crore and Rs 381 crore from the centre. Further, an amount of Rs 506 crore representing interest written off in past on loans to IISCO from sail was also written back into SAIL's books, resulting in no dues from sail on account of the Burnpur-based company.

Tata Tea to merge Tata Tetley

11th June 2005: Tata Tea has decided to merge its wholly owned subsidiary, Tata Tetley, with the company. Percy Siganporia, managing director, Tata Tea said the merger would compensate for the loss in Tata Tea’s topline after the recent divestment of part of its portfolio of tea gardens.

Tata Tetley, the 50:50 joint venture between Tata Tea and Tetley, was primarily in the business of tea bagging and packaging. The company’s businesses were in West Asia and Poland. After the acquisition of Tetley, the company moved Australian operations into Tata Tetley and ramped up capacity of the plant.

The entire manufacturing operations of Tetley, Australia, located at Yara, were shut down and transferred to the export oriented unit (EOU) in Kochi with the idea that the factory would source tea from across regions, add value and then market the product. Tata Tetley became a subsidiary of Tata Tea as a consequence of the acquisition of Tetley in 2000.

The company was incorporated during 1992 and after the formation of the joint venture between Tata Tea and The Tetley Group, UK, the business of Tetley division of Tata Tea was transferred to the joint venture company during 1994. Tata Tetley has a 100% export oriented unit at Kochi and a domestic unit also at Indore, Madhya Pradesh. The manufacturing base in Kochi was considered as the most efficient and cost effective unit in the group.

This unit was also capable of producing different kinds of tea bags and packet teas with various pack sizes and the range of such products goes to 40. Siganporia said, it did not make commercial sense to keep it as a separate entity post-acquisition of The Tetley Group.

Post-acquisition, the company buried the Tata Tetley brand in the domestic market and wound up its domestic marketing operations so that Tata Tetley could focus on exports. The company’s role in the domestic market is now restricted to that of a tea bag converter for Tata Tea, which launched the ‘Tetley’ brand tea bags under brand license agreement with The Tetley Group.

Tata Motors okays Tata Finance Ltd (TFL) merger in 8:100 ratio

9th June 2005: Tata Motors’ shareholders, secured and unsecured creditors, have approved the scheme of reorganisation and amalgamation of Tata Finance Ltd (TFL) with the company.

Pursuant to the scheme of reorganisation and amalgamation, eight ordinary shares of Rs 10 each of Tata Motors will be allotted to the shareholders of TFL in exchange for every 100 equity shares of Rs 10 each of TFL, according to a company notice issued to The Stock Exchange, Mumbai (BSE).

The said exchange ratio was based on a valuation undertaken by BS Metha & Co which was further substantiated by a “Fairness Report” obtained from JM Morgan Stanley Pvt Ltd.

The company had earlier stated that the merger was expected to enable the vehicle financing business of Tata Finance to grow stronger by leveraging its synergies of the direct business model with the dealer driven business.

The merger will also allow TFL shareholders to participate in the growth of Tata Motors and thereby significantly gain with an upside of dividend and shareholder value creation, the company had then stated.