Tatas to have off plantation business to Kannan Devan Hills next week
The Financial Express — March 23, 2005

Tata Tea Ltd is expected to hive off its plantation business to Kannan Devan Hills Plantation Company (Pvt) Ltd next week. The company is expecting the formal nod from its shareholders in this regard next week. According to the company's plan, former and present employees of Tata Tea in Munnar will hold 75% stake in the new company. Tatas will have 19% stake and the balance 6% will go to a Trust. The new company will own 14 tea estates spread over 57,000 hectare in the Munnar Hills in Kerala.

The 'Kannan Devan' brand will, however, remain with Tata Tea. The new company, to which Tata Tea's tea factories will also be transferred, will be free to auction its teas to any prospective buyer. Tata Tea will also source the commodity from the new company according to its need, Percy T Siganporia, managing director, Tata Tea said here on Friday. He said, the new business model will reduce overheads and average employ cost by Rs 8 to Rs 10 a kg of tea.

"The company will also have the flexibility to go beyond tea to augment revenues by making use of the land for organic cultivation of tea and other crops, and by foraying into floriculture, horticulture and planting of medicinal herbs and shrubs," he said. This would open up a totally new agricultural model for the new company. Tata Tea, which sources 50% of its tea from the north-east, however, is not planning to replicate its model in its plantations there, he added.

Mr Siganporia said the restructuring would not affect the total sales of Tata Tea. "I do not expect any impact on our top line," he said. Mr Siganporia said Tata Tea would also sell its 'free-hold' estates, two in Munnar and six in Anamalai region, to bidders subject to certain conditions. ICICI Securities would assist the company in this matter.