Likely related party transactions worth Rs 255 crore have recently been approved by shareholders
Tata Steel has decided to provide a helping hand to its ailing group outfit, listed entity TRF Ltd, the maker of earth-moving vehicles and construction equipment.
With continued slowdown in core sectors, particularly construction, many of TRF's clients have gone for insolvency, and the company is in deep red now and the losses have eroded its net worth.
In such times, "related party" transaction with Tata Steel, which owns 34.11% in TRF, would help in tiding over the crisis to some extent, believes the company.
Likely related party transactions worth around Rs 255 crore have recently been approved by shareholders.
More support is being negotiated upon with Tata Steel, TRF has disclosed in notes to its earnings.
"The company expects to generate cash flow from improvements in operations, increased business and assistance from the promoter entity currently under discussion, increased efficiencies from the project activities, proceeds from restructuring of its subsidiaries including the ones proposed, renewal of the facilities from banks as and when they fall due, etc, which will be sufficient to meet future obligation of the company," TRF said after incurring loss of Rs 13.91 crore for the quarter ended June 30, with accumulated losses of Rs 364 crore that eroded its net worth.
"The company is also exploring opportunity to further its business with Tata Steel, for which approval of shareholders has been obtained by way of postal ballot. Opportunities are being explored in the areas of design, engineering and supervision, fabrication, construction and lifecycle services. The above measures will assist in improving the performance of the company," it has disclosed in its balance-sheet.
"During FY18 some of the major over-leveraged companies in the infrastructure, power generation and steel sector were referred to National Company Law Tribunal under Insolvency and Bankruptcy Code. Some of them were customers of the company. As a result, the business was adversely affected," it said.
During the first quarter, receivables including Rs 7.58 crore is due from a customer currently under insolvency proceedings, TRF said, adding it is hopeful of recovery.
A transaction with a related party is considered material if it is entered into individually or taken together with previous transactions during a financial year, exceeding 10% of the annual consolidated turnover of the listed entity as per the last audited financial statements.
Last year, Tata Steel entered into related-party transactions with another of its group outfit, listed packaging container maker Tinplate Co of India for buying hot rolled coils worth up to Rs 1,800 crore.
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"The company expects to generate cash flow from improvements in operations, increased business and assistance from the promoter entity currently under discussion, increased efficiencies from the project activities, proceeds from restructuring of its subsidiaries including the ones proposed, renewal of the facilities from banks as and when they fall due, etc, which will be sufficient to meet future obligation of the company," TRF said after incurring loss of Rs 13.91 crore for the quarter ended June 30, with accumulated losses of Rs 364 crore that eroded its net worth.
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