The Hindu Business Line : Tata Tea plans to enter Russia, CIS markets

Plans ahead
Russian joint ventures to be ready by year end.
Planning entry into South American markets.
No plans of bonus shares in near future.

Happy interaction: Mr Ratan Tata, Chairman, Tata Tea Ltd., meeting a section of shareholders, after the Annual General Meeting of the company in Kolkata on Friday. The company plans to have 50:50 joint ventures in Russia. - A. Roy Chowdhury

Our Bureau

Kolkata, Aug. 10

Tata Tea Ltd (TTL) proposes to enter Russia in a big way. “We’re working on setting up a path-breaking venture in Russia and with it in the former CIS countries such as Ukraine, Kazakhstan and other countries which are now on growth path and getting into the European mode,” Mr R.K. Krishna Kumar, Vice-Chairman, told newspersons at the end of the company’s annual general meeting here on Friday.

50-50 joint ventures

The plan for Russia, as Mr Krishna Kumar explained, would be to launch joint ventures, most probably on 50-50 basis, for undertaking manufacturing and packaging activities. “The markets hold out promise for tea coffee and other value-added beverages,” he observed. The initial structure should be in place fairly soon and the joint ventures should be ready by the end of the current fiscal, he said indicating that the Russian outfits should be used to enter other markets in the region.

Tata Tea’s proposed entry process started a few years ago with the acquisition of Tetley in the UK and the company is already present in China, Canada, the US and other countries through acquisitions and joint ventures. The joint venture in China would be leveraged to expand operations in South East Asia and Far East. “We’re also planning to enter South America,” he said.

Focus on US

The company, as it was indicated, was also focusing on the US market which was most attractive from the beverage business point of view. “The Glaceau has taught what we should or should not be doing in the US market,” Mr Krishna Kumar said.

Earlier, while addressing shareholders, Mr Ratan Tata, Chairman, said the company was set to transform itself from a plantation company to an integrated well being and beverage company. “It will be Indian-owned global company,” Mr Tata observed predicting a very exciting future for the company and substantial addition to shareholders’ value.

Resources

Mr Tata discounted the possibility of bonus shares, at least in near future, making it clear that the company’s resources would be used to fund acquisitions and expand operations to achieve further growth ultimately benefiting shareholders. The stock split would be considered in future and restructuring and amalgamation would take place at appropriate time, also taking into consideration the tax implications.

The restructuring of the South Indian gardens had yielded desired results and similar exercise was on in respect of the North Indian gardens, hoping similar benefits would follow from the exercise. The produce of these gardens would be bought at auction prices, he said.

Mr Tata estimated Tata Tea’s current year’s capital expenditure at Rs 15 crore. The rupee appreciation would have negative impact on the company to the tune of Rs 3 crore and on the group to the tune of Rs 10 crore, he added.

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