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Tisco EGM nods to Lafarge deal and financial recast; new funds to shore up Jamshedpur plant

The shareholders of the Tata Iron and Steel Company today approved the proposal of selling the company's cement division to the Indian subsidiary of Lafarge SA of France at an aggregate consideration of Rs 5.5 billion.

At an extraordinary general meeting of Tisco in Bombay, the shareholders also approved the proposal to create mortgages, charges and hypothecations of the assets of the company upto a value not exceeding Rs 10 billion.

This will help the company to meet the future capital expenditure requirements and also seeking additional loans from lenders.

Replying to shareholders inquiries, Tisco chairman Ratan Tata said that the sale of the cement division (subject to the government's approval) would enable the company to pay back its loans and improve the financial position.

Further, a part of the sum gained from the sale would be used in financing the construction of coil rolling mill plant of Tisco at Jamshedpur, Bihar.

The plant would add value to Tisco's products and push up sales for the benefits of the shareholders in future, Tata said.

Tata said that the creation of charges would help the company clear its debts. ''We will be repaying about Rs 10 billion old debts or would replace with other debts,'' he said.

Asked about hiving off other subsidiaries or divisions of Tisco, Tata said that he was looking at all options as they "would hold on to subsidiaries that give value addition and make profits while other divisions would have to be restructured".

At present, Tisco management is fully focusing on upgrading the operation of its plants at Jamshedpur and stop any further expenditure for the development of Gopalpur project. "So far, our expenditure at Gopalpur was on land acquisition and rehabilitation of the villagers," he said.

Tata said that Tisco had incurred a loss of Rs 1.5 billion towards its cement division over the last four years and "we thought it beneficial for the shareholders to divest the division through an independent valuer Jardine Fleming India Securities Limited who would charge a fee of one per cent of the estimated sale value deal".

As per the sale agreement, Lafarge will take over the services of the employees of the cement division and also liabilities including loans obtained from IDBI and ICICI for the cement division.

The outstanding balance of the loans as on December 31, 1998, was Rs 658.2 milion, Tata said. The stamp duty on the transactions will be shared equally by both Tisco and Lafarge.

Tisco also entered into a long-term slag supply agreement for the supply of dry granulated slag to Lafarge as an input to the cement plant.

UNI

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