TASL is reportedly in talks with a few investors with interest in renewable energy sector. The consideration received for the minority stake would be used to expand the co-generation capacity which currently stands at around 47 mw.

The company had recently informed the stock exchanges about its plan to hive off its co-generation operations into a wholly-owned subsidiary. The dual objective behind the move, according to a senior company official, is to create necessary conditions for raising resources for increasing co-generation capacity while at the same time deleveraging its sugar operations thereby bringing down the debt in it to sustainable levels.

TASL's sugar crushing capacity is 7,500 TCD while its sister concern Shree Ambika Sugars has 9000 TCD. Bagasse-based co-gen facility is available only at TASL's facilities and there exists scope for another 50 mw at Ambika Sugars. This requires investment to the tune of Rs 200 crore. With sugar industry in a bad shape, investors are hard to come by and even those who evinced interest preferred not to put their money because of the sugar operations, he added.

This forced the company to convert the power division into a separate company. As a stand-alone entity, the power company has an added advantage of raising debts at a much cheaper rate as it comes under infrastructure funding.

TASL's current debt-equity ratio is about 1.7 and the transfer of liabilities pertaining to co-gen facilities would bring this down to less than one. TASL will get a consideration of around Rs 42 crore for the transfer of co-gen assets.

Of this, Rs 10 crore will be in the form of equity and the balance a mixture of redeemable preference shares and cash which will be used to reduce its debt. This, the official said, would reduce TASL's debt-equity ratio further to around 0.50 which will be a sustainable level of leveraging as the current sugar economics permits only minimal financial costs.

In order to ensure that TASL's investment in power subsidiary is reflected in its books the company plans to bring out a consolidated balance sheet. For TASL, the co-gen operations have been the saviour during the last few years. In 1998-99 power sales constituted Rs 25.82 crore of the Rs 127.70 crore turnover. With sugar prices ruling low, almost the entire profit for the year amounting to Rs 9.22 crore came from power generation.