22 February 2019: Tata Steel has decided to continue supporting its ailing group outfit, TRF Ltd, maker of earthmoving vehicles and construction equipment.
With infrastructure and construction sector reeling under sustained slowdown, listed entity TRF’s losses continue to pile up. This has forced Tata Steel to infuse an additional Rs 250 crore in the form of preference shares into its arm.
This is over and above the assistance in the form of related party transactions worth around Rs 255 crore committed for the ongoing financial year as the company continues to explore ways to increase business and assistance from the promoter entity. TRF’s losses widened from Rs 18.54 crore in the September quarter to Rs 24.50 crore in the October-December period.
With accumulated losses touching Rs 406 crore, the company’s net worth has been fully eroded. Its receivables have been impacted as some of the major over-leveraged companies in the infrastructure, power generation and steel sector have been referred to the National Company Law Tribunal under Insolvency and Bankruptcy Code.
TRF, in which Tata Steel holds a 34.11% stake, has been selling off some of its overseas ventures that were set up when the market conditions were favouarble.
During the December quarter, it sold off its step down subsidiary Dutch Lanka Trailers LLC, based in Oman, at book value that resulted in a loss of Rs 63 lakh.
Earlier this year, TRF Singapore Pte sold the shares of its arm York Transport Equipment Pte and its subsidiaries for a total consideration of Rs 291 crore to SAF Holland. As a result, TRF Singapore took a hit of Rs 83 crore in the value of the investments as its capital base was subsequently reduced.
“The company expects to generate cash flow from improvements in operations, increased business and assistance from the promoter entity currently under discussion, proceeds from restructuring of its subsidiaries,” TRF disclosed in its December earnings details.
It is not just TRF, Tata Steel had earlier extended financial support to another group outfit, listed packaging container maker Tinplate Company of India through related party transactions in the form of sourcing hot rolled coils worth up to Rs 1,800 crore.