Tata Global may restructure China operations

Tata Global Beverages (TGB) may “restructure” China operations. According to Cyrus P Mistry, Chairman of Tata Group, there are challenges in these operations.

TGB’s annual report maintains that the Chinese joint venture Zhejiang Tata Tea Extraction Company has reported a ₹15.34 crore loss (before tax) and a turnover of ₹3.08 crore till December 31, 2015.

It also maintains, delays continue in stabilisation of the China business and various options of restructuring are being evaluated.

“The China venture is something that we will be looking at restructuring. In what way that restructuring will be done is yet to be seen,” he said in response to a specific shareholder query at the 53rd Annual General Meeting here on Wednesday.

In an earlier response (to a shareholder query), Mistry had said: “We have our challenges in operations in China. And we will take a call on the business in the coming days.”

The company was also looking at its eastern European and Russian operations closely. Alternatively, it would not shy away from taking “tough decisions”, if operations there were not successful.

“We are monitoring them (eastern Europe and Russian ops) closely to see how we can make them successful. Or alternatively, we’ll have to take tough decisions,” he said.

International operations During his speech, the Chairman pointed out that global economic trends remain uncertain.

According to him, the UK’s exit from the European Union is expected to pose some risks in trading and buying, thereby leading to inflationary impact in some businesses.

International operations account for a substantial part of the company’s revenues.

TGB’s international brands include offerings such as Tetley, Eight O Clock and Good Earth.

Impact of GST “As regard to Brexit, we see with the movement in currencies in the longer term, challenges in terms of translation impact on our balance sheet. But in the short-term, we are well hedged,” he later said.

Imposition of GST will have an “inflationary impact” leading to increase in tea prices, Mistry pointed out.

“With GST, there will be an inflationary impact on the prices of tea, but this will be across the board for us,” he said.

Inorganic growth According to Mistry, GST has to be looked at “in totality” in a much wider spectrum. In the long term, it will be beneficial for the industry and consumers.

Inorganic growth will continue to be a strategy for TGB.

“I think we should not be unabashed to make aggressive acquisitions (or) aggressive moves to acquire. But, (we also need to) be clear that if we do not get the right price or in the right perspective, we should let it drop,” he said.

Himalayan, TGB’s premium mineral water offering, was still making losses. But had witnessed a good top-line growth.

“We are looking at a different strategy. The sales have increased significantly. It still continues to lose money. But what we have seen is significant topline growth. Now we need to translate that into bottom-line growth,” Mistry said.

TGB will also tap the e-com space to push products and sales in the coming days.

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