Tata Tea, a Rs 3,500 crore beverages company, on Monday said it would offload 80 per cent of its stake in its North India Plantation Operations to a group of investors and employees.
Amalgamated Plantations, the company to which the Tatas will transfer its NIPO business, covers the company's 20 plantations in Assam and five in Dooars (West Bengal) covering 24,000 hectares.
Amalgamated Plantations, which has been valued at Rs 360 crore by management consultant Ernst & Young, has a turnover of about Rs 250 crore.
While Tata Tea will retain 20 per cent stake in the new company, IL&FS and Infrastructure Finance Corporation, a World Bank subsidiary, will also pick up 20 per cent stake each in the company.
The remaining 40 per cent stake will be split among Global Managed Services, a Mumbai-based consultancy, which will work with the company to develop non-tea-based revenue streams, Tata Investment Corporation, Hardeep Singh, former chairman of Cargill India and chairman of the newly formed company, and the plantation employees.
Employees are expected to have stake in the range of 15-20 per cent. The debt-equity ratio is yet to be finalised, but it is likely to be pegged at 1:1. This is IFC's first overseas investment in the plantation sector.
The move is in line with Tata Tea's vision of focusing on the non-plantation business and becoming a strong player in the branded beverages business.
The plan to exit plantations was one of the key steps taken in that direction. Two years ago, the company had carried out a similar exercise in its south India plantations, when it was divested to Kanan Devan Hills Plantations on the similar lines.
The new company will be formed effective April 1, 2007, once the required court approvals come through. R K Krishna Kumar, vice-chairman, Tata Tea, said the company had permission to plant non-tea crops in 5 per cent of the area in Assam, where the company had already entered floriculture, vegetable farming, spices and fisheries.
Hardeep Singh, chairman, Amalgamated Plantations, said the company would be looking at increasing the proportion of multi-cropping activities once the required permission came in and would then consider exporting certain products such as flowers and spices to other states across India.
The Tata Tea scrip on Monday dipped 0.52 per cent to close at Rs 672.85 on the BSE on a day when the Sensex moved up 0.33 per cent.
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