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Kohinoor Mandal
Nilanjan Dey

To put in minimum Rs 125 cr; may need to buy unsubscribed portions

Kolkata , Sept. 6

Tata Tea Ltd is firm on meeting all its commitments in the forthcoming Rs 250-crore rights issue of its subsidiary, Tata Coffee Ltd, despite the huge debt burden of about Rs 2,000 crore that it would have to service following the recent acquisition of the US-based Glaceau.

A senior official of Tata Tea said the company will not renounce any part of its rights and has instead decided to participate in it wholly.

"We have already given a written undertaking to SEBI on this matter", the official said.

In March, Tata Coffee, in which the tea major holds around 50 per cent, made its first announcement on the rights issue. However, the process got delayed and there were adjustments with regard to the instrument through which resources were to be mobilised. The final announcement on the subject was made in July.

Acquisition

Later, on August 23, Tata Tea announced the acquisition of 30 per cent stake in Energy Brands Inc, which owns the Glaceau brand, for $677 million.

It stood as the biggest deal of its kind by an Indian company.

Tata Tea deployed the UK-based Tata Tea GB Ltd, which owns the Tetley brand, for the acquisition.

Out of $677 million, Tata Tea GB will be expected to provide $250 million from its coffers by way of equity contribution. The rest, $427 million or about Rs 1,921.5 crore, will be raised as debt.

When asked whether Tata Tea has different thoughts about the Tata Coffee rights issue or a postponement, the official replied in the negative.

Requirements

Tata Tea, given its 50 per cent-plus holding in the coffee venture, will be required to put in a minimum Rs 125 crore in the rights offer (the exact size of the issue being Rs 249.37 crore). It will also need to buy unsubscribed portions, if any.

Tata Coffee will issue partly convertible debentures to the existing shareholders. One debenture will be issued for every two equity shares held. About 62.34 lakh debentures, each priced at Rs 400, will be issued.

A Rs 400-debenture will have two portions. The first portion, valued at Rs 250, will be converted into one fully-paid equity share of Rs 10 on allotment.

The second portion - the remaining Rs 150 - is non-convertible and will be redeemed in three equal installments of Rs 50 each at the end of the fourth, fifth and sixth years.

The coupon rate has been set at seven per cent. SBI Capital Markets is the lead manager.

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