The Hindu Business Line : Tata Tea to exit Lanka plantation business

The recent announcement by Tata Tea's Sri Lankan partner on a move to sell off the plantation business is actually an extension of an exercise that started within India a few years ago.

Tata Tea had long decided to exit the plantation sector and this was disclosed by none less than Mr R.K. Krishna Kumar, Vice-Chairman of the company and Director of Tata Sons Ltd.

In an interaction with the media in February this year, he had said the company had decided to exit the plantation sector in a phased manner but the modalities will be different from one region to another.Mr Krishna Kumar said the company was concentrating more on the global beverage market through branded operations. Moreover, its bottomline had improved after it started moving out of the plantation activities.

By that time the company had successfully handed over the management of majority of its South Indian tea gardens to Kanan Devan Hills Plantation Co Ltd, where its employees became the majority shareholders.

In that meeting he had categorically stated that a similar exercise would also be conducted for the Sri Lanka-based Watawala Plantation Ltd, which owns 18 estates and has an annual production of 10 million kg of tea.

Total area

The total area of the plantation is around 12,500 hectares, of which 41 per cent is tea, 18 per cent rubber, eight per cent palm oil, seven per cent fuel wood and the rest is uncultivable. On Monday, reports from Colombo stated that Tata Tea's partner had initiated dialogues for selling off the plantation activity. However, there was no official confirmation from the company in India.

Stake details

Tata Tea's investment in Sri Lanka is through a 51 per cent stake in Sunshine Holdings Ltd, which subsequently holds 58.75 per cent stake in Estate Management Services Pvt Ltd. This company holds the controlling stake in Watawala Plantations.At present, a due diligence study has been undertaken at Watawala. If both the partners are satisfied with the outcome of the study, then only will a deal be struck.

Sri Lanka is not the only region where Tata Tea prefers to exit. For the North India Plantation Operation (NIPO), similar activity is on and company sources said that things are slowly falling in place.

"Though the basic objective is same, still the restructuring of NIPO will be different from Kanan Devan. Several aspects had been considered. A formal announcement is likely to be made soon," sources said.

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