Niskalp left out of Tata Finance merger

Tata Finance, which is being merged with Tata Motors, is leaving behind Niskalp Investments and Trading Company, which was responsible for putting the non-banking finance arm in a financial mess in 2001.

Tata group sources said Niskalp will be parked with one of the group companies. They, however, refused to divulge the name of the company to whom the shares will be transferred.

Tata Finance holds 50 per cent stake in Niskalp, representing 4 crore (40 million) shares of Rs 10 each at a value of Rs 56 crore (Rs 560 million). Tata Sons holds about 49 per cent in the company and the rest is being held by Telco dealers.

Ever since the Tata Finance fiasco came into the public scrutiny in 2001, the company has been reducing its holding in its erstwhile subsidiary Niskalp as well as curtailing its asset base exposure. It used to hold 99.4 per cent in Niskalp.

Tata Sons, the group's holding company, took nearly 50 per cent stake in Niskalp and de-subsidiarised it for better control and compliance. It is learnt that Tata Sons will not be hiking its stake in Niskalp but one of the group's investment company may acquire Tata Finance's 50 per cent stake.

Niskalp owns a 21.5 mw windmill power project. Tata Finance also has a similar investment in a 21.5 mw windmill power generation project, which will be a part of Tata Motors.

However, neither of these projects can be sold till 2007. This rider was part of the conditions imposed by the government to get the excise duty benefit. They can be sold seven years after they are set up. The timeframe expires in 2007. Tata Finance had earlier sold a windmill power plant to group company Tata Power.

Tata Finance's other investments are in Tata Motors, Tata Share Registry and Tata Securities (formerly called Tata TD Waterhouse Securities).

Tata Finance also holds 8 lakh shares in Tata Motors, which is estimated to have a value of Rs 40 crore. These shares may be acquired by Tata Sons. The non-banking company also holds a stake in Tata Share Registry, which is all set to be sold to the Mumbai-based stock broking company Darashaw.