Eveready seeks PE funds as strategic investors to offload stake in tea subsidiary

Purvita Chatterjee Mumbai | Updated on January 15, 2018

Amritanshu Khaitan, MD, Eveready Industries

Eveready Industries, which is the process of restructuring its packet-tea business as a step-down subsidiary, expects to offload 26-50 per cent to a strategic investor. The battery major wants to give a fresh impetus to its tea business. Aligning it with group plantation company McLeod Russel is also a possibility being explored to emerge as the third-largest tea company in country after HUL and Tata Global Beverages.

Amritanshu Khaitan, MD, told BusinessLine: “Our first preference for a strategic investor will be PE funds, to whom we would offload 26-50 per cent stake. The amount of money coming into the subsidiary will depend on the valuation of the business.”

The new investments will also help the Kolkata-based ₹1,350-crore company acquire regional firms to grow its packet-tea portfolio, which currently has two tea brands — Tez and Premium Gold.

With a strong distribution network which reaches 1 million outlets, Eveready is also open to tie-ups with mult-national and regional companies.

“We are open to forging JVs and floating SPVs (special purpose vehicles) for MNCs and regional companies that might want to leverage our distribution strength. Both our segments of tea and batteries reach 1 million outlets directly today,” he added.

Both Eveready Industries and the ₹2,000-crore Mcleod Russel (the largest tea-plantation company) are listed entities belonging to the ₹6,500-crore BM Khaitan Group.

“The board will look into the possibility of a merger (with Mcleod Russel), and it might be one of the options for value addition in the tea business,” Khaitan said.

Considering competitors such as HUL and Tata Global have been selling out their plantation companies to become marketing oriented, owning the plantations is seen as a strength by the Khaitan Group.

“By having our own tea plantations, we are in control of the business and can grow from a product to a brand. Even companies like Tata Global Beverages continue to own a part of their plantations.”

Packet tea currently has a sales turnover of ₹80 crore and rides on Eveready’s battery distribution. Another reason for spinning off the tea business as a subsidiary is that the tea brands do not carry the Eveready name, unlike batteries, lighting and the recently launched small-appliances category in the company’s portfolio.

However, unlike the ₹1,500-crore batteries segment which is registering 7-8 per cent growth, the tea category has slowed down to 4-5 per cent. “Tea is a saturated and mature category which has slowed down. But after the restructuring we expect to take up the turnover of our tea sales from ₹80 crore to ₹200 crore in the next 3-4 years.”

Published on April 03, 2017

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