The consumer-focused businesses of two Tata Group companies are being consolidated under one roof to recharge the FMCG play of the salt-to-software conglomerate.
Tata Chemicals will transfer its edible salt, spices and other food businesses to Tata Global Beverages, which will be renamed Tata Consumer Products Ltd through a non-cash, share swap deal.
The scheme of arrangement, which will seek the NCLT’s approval among others, will see Tata Chemicals shareholders getting 114 shares of Tata Consumer Products for every 100 shares held on the record date.
Tata Chemicals will only transfer human resource — around 300 employees — and intangible assets such as distribution network, brand and marketing to Tata Consumer, while keeping the manufacturing facilities with itself. The two companies have struck a 25-year contract for a seamless transfer of products from a manufacturing base to a marketing outfit.
The proposed transaction will create a focused consumer products company with a combined turnover and EBITDA of Rs 9,099 crore and Rs 1,154 crore, respectively, for the twelve months ended March 31, 2019 on a proforma basis.
The turnover of the demerged division of Tata Chemical is Rs 1,847 crore, representing 16 per cent of the total turnover of the company.
Commenting on the announcement, N. Chandrasekaran, chairman of Tata Sons, said: “Tata Consumer Products consolidates our current presence in food and beverages in the fast-growing consumer sector. Through this combination, we have created a strong growth platform to meet the growing aspirations of Indian consumers.”
This is the second time in a decade that Tata Global is donning a new avatar. The company, which has a registered office on Bishop Lefroy Road in Calcutta, was known as Tata Tea for decades, reflecting the reliance on the tea plantation and packet tea business.
After water (Himalaya) and coffee (Eight O’clock) came to its portfolio, through acquisitions in India and abroad, Tata Tea was named Tata Global Beverages in 2010. The company made a partial exit from plantations by divesting tea gardens to subsidiaries and offloading substantial holdings to plantation workers and individuals.
Road map
R. Mukundan, managing director & CEO, of Tata Chemicals, said the company would shape its strategies to become a science-led chemistry company.
At present, 80 per cent of the turnover come from basic chemistry products such as soda ash and sodium bicarbonate, while the speciality business (agro-science, material science, nutrition energy storage lithium battery) provides the rest. In five years, the company expects speciality chemicals to contribute to half the revenue.
Ajoy Misra, managing director & CEO of TGBL, said the transaction would be consistent with the strategy to transform it into a broader FMCG player.
TGBL and Tata Chem shares closed down at Rs 198.60 and Rs 555.50 on the NSE, respectively, even as the announcement came after the trading hours.
The Telegraph
