The proposal, which was cleared by the Telco board on December 22, is subject to approval from the company's shareholders, a statement issued by the Tatas said.

The proposed spin-off of the construction equipment business will enable Telco to forge international alliances to unveil an exhaustive range of earthmoving and construction equipment in India, the company said.

The company has identified construction equipment business as a key growth area for the future, and the subsidiary will gear up to take on challenges from international players, who are set to enter the domestic market on their own or through joint ventures.

"With significant investments expected to flow in the infrastructure sector, the construction equipment business in India is likely to witness growth opportunities in the coming years. Telco, with aview to exploiting these opportunities in the infrastructure sector, intends to widen its product range to include the entire range of earthmoving and construction equipment," the company has said.

Telco's construction equipment business unit is a market leader in excavators and mobile cranes, and achieved a 10 per cent sales growth in the last fiscal. Production at 1,035 units was nine per cent higher in 1997-98, and with topmost priority being laid on infrastructure sector, the company hopes to achieve higher production levels in the current fiscal.

News of Telco hiving off its construction division into a subsidiary led to a sharp rise in the stock price. In an immediate reaction to the announcement made on the NSE, Telco's scrip jumped 6 per cent to close at Rs 166.

Meanwhile, Bombay Dyeing chairman Nusli N Wadia and Tata Sons director R Gopalkrishnan have joined automobile giant Telco as additional directors. Wadia, it may be recalled, is already on the Tisco board while Gopalakrishnan was recentlyinducted into Tata Sons. Observers view the development as a continued effort by the group to professionalise management and in the case of Telco, it is more significant as the company is all set to introduce the Indica car.