Worried institutional investors write to Tata Steel, Tata Chem boards

Suresh P Iyengar Mumbai | Updated on January 15, 2018

Boards to meet on Thursday, Friday to consider the financials for Sept quarter

Jittery over the outcome of the ongoing tussle between Ratan Tata and Cyrus Mistry, foreign portfolio investors have shot off letters to Tata Steel and Tata Chemicals board members expressing their concern.

The board of Tata Chemicals and Tata Steel will meet separately on Thursday and Friday to consider the financials for the September quarter. The unprecedented public spat in the Tata Group has upset foreign investors and are gauging the financial impact on the two highly indebted companies.

With no sign of peace between the warring groups, financial institutional investors expect the uncertainty to percolate down the rungs and hit the functioning of the companies, particularly when there are signs of economic revival, said a source privy of the information.

They are also concerned that the Tata-led management reversing the decisions taken by Mistry to trim debt by selling of assets, he added.

Both Tata Chemicals and Tata Steel have made huge provisions on their overseas asset and sold off assets to bring down the debt levels.

Tata Chemicals recently sold its urea plant at Babrala in Uttar Pradesh, to Norway-based Yara International for ₹2,670 crore. The turnover of urea business was ₹2,301 crore in financial year ended March 31, 2016, accounting for 21 per cent of total turnover.

The rating is constrained by profitability susceptible to volatility in raw material prices, exposure to cyclical soda ash business and highly regulated fertiliser business, under-recovery of subsidy as well as stretched working capital cycle and the weak performance of its relatively high-cost European and Kenyan operations.

Rating agency Brickwork has put ₹250 crore unsecured non-convertible debentures worth ₹250 crore under watch on account of heightened management risk due to change in top management at holding company/ group level, which may impact the strategic decision making in the company. As of March, Tata Chemicals stood at ₹8,694 crore.

Similarly, Tata Steel is struggling to trim debt by selling of its European asset. The change in top leadership may slow down the process of finding a suitor for its struggling UK asset including that of Port Talbot plant which employs 4,000 people.

As the fallout of the fight within the Group, the visiting UK Prime Minister Theresa May could not get an appointment with Tata Steel officials, sources said. Promoters have pledged their holding worth ₹710 crore as of March. The company has consolidated debt of over ₹85,000 crore.

Foreign portfolio investors of Tata Chemicals including the Norway’s sovereign wealth fund Government Pension Fund and Franklin Templeton Investment Fund hold about 26 per cent in the company while they hold 13 per cent in Tata Steel.

Published on November 08, 2016

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