The Hindu : Business : New company formed to sell Tata Tea plantations

Online edition of India's National Newspaper
Saturday, Mar 19, 2005

Business

Business

New company formed to sell Tata Tea plantations

By Our Staff Correspondent

CHENNAI, MARCH 18. Tata Tea Limited has decided to hive off 17 of its tea estates in the South to a new company being formed by a group of employees of the company. The new company will be Kanan Devan Hills Plantation Company Private Limited. The employees will hold 75 per cent stake in the new company while Tata Tea will hold 19 per cent. The balance will be held by a few trusts.

Apart from the estates in Munnar, the company plans to sell or lease some of its estates located in Kerala and Tamil Nadu, including one coffee estate, according to P. Siganporia, Managing Director of Tata Tea.

Addressing a press conference, Mr. Siganporia said the company worked out a new business model to restructure its plantation business in south India.

The restructuring would enable Tata Tea to focus more on the branded business. It has brands such as Tata Tea, Tetley and Agni at the national level. The company had been toying with the idea of restructuring the plantations business for the past two-three years because it planned to focus more on the branded tea business. It would continue to source teas from the new company, but that would be one among several sources for similar teas worldwide, he said.

The transfer of business includes the estates' assets and liabilities, regional office and connected service departments. While these estates historically required their lease to be passed on in entirety, the remaining eight south Indian estates (including one coffee plantation), over which the company had `free hold', would be sold with current employment conditions. The move was subject to all necessary approvals and Tata Tea would be seeking nod from shareholders by next week.

"The traditional colonial model of ownership is not sustainable," Mr. Siganporia said.

He refused to quantify receipts to the company from the transfer or sale of estates at market cost. An independent valuation had, however, been done by Ernst & Young. ICICI Securities would extend a loan to the new company and TTL planned to participate in subordinate debt, he added.

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