Tatas to hold 19% stake in Kannan Devan Hills
Business Standard — March 19, 2005

Tata Tea Ltd, one of the largest integrated tea companies in the world, has decided to transfer 17 of its leased tea estates to a separate company called Kannan Devan Hills Plantation Ltd, which will be owned by the employees of the tea estates. Percy T Siganporia, managing director, Tata Tea, said shareholders approval through a postal ballot is expected next week. Shareholders’ approval will also be sought for the sale of eight tea estates owned by Tata Tea (free-hold estates). ICICI Securities is managing the sale transaction, he added.

Tata Tea would hold 19 per cent stake in the new company and the remaining 6 per cent would be held by a trust, Singanporia said adding the restructuring would not affect the total sales of the company. About 3,600 workers of the Kannan Devan Estates, who had opted for the voluntary retirement scheme, are also expected to become the shareholders of the new company. The workforce in these tea estates is around 12,500. However, Siganporia said Tata Tea would not replicate the model at its tea estates in the north-east.

Last month, the board of Tata Tea gave its approval to the transfer of the lease plantation asset to the employees of Munnar tea estate. There are potential opportunities to generate new sources of revenues from the 57,000 acres of land, Siganporia said. The new company can look at alternative sources of revenue other than tea cultivation such as exploring the possibility of floriculture, cultivating medicinal herbs and shrubs, Siganporia added. Siganporia said the new company was free to decide on the sale of the tea to prospective buyers as determined by the market. However, the Kannan Devan brand would remain with Tata Tea.

Along with the estates, Tata Tea’s R&D wing at Munnar, the processing unit and other physical assets were also being transferred to the new company. The Tata school, a hospital and a centre for the mentally challenged people in Munnar would remain with the Tatas. “We will have to find a way to make these institutions viable and sustainable,” Siganporia said. For the shareholders of Tata Tea, the restructuring would help them get full value.

Tata Tea produces about 65 million kg of tea, of which an estimated 30 million kg of black tea comes from its southern estates, annually. The company hopes to maintain the share, even after the restructuring by actively participating in the auctions from Kannan Devan and other tea estates, which were also being put up for sale, he said.