Newsmaker: Deepak Khaitan

Time for more tea

McLeod Russel India Ltd

In 10 days flat, Deepak Khaitan clinched one of the biggest deals in the tea industry in recent times. It all started when Philip Magor, chairman of Williamson Tea Assam, invited him for a chat in mid-April.

Formal discussions, however, were initiated at the end of April during one of Khaitan's visits to London. It also happened to be the first formal meeting between the Khaitans and Magors after their split in 2001.

On May 21, Khaitan left for London on a holiday with his wife. The deal was clinched over the next 10 days "" bringing the two families together, once more.

The move caught the entire tea industry by surprise, as they woke up to find out one Monday morning that the ownership of one of the most coveted gardens had changed. The only difference being that it had passed into what Magors called "safe hands".

At a time when weak tea prices had come back to haunt the industry, Khaitan's bold step was being interpreted by industry representatives in different ways.

Some felt that the decision to acquire Williamson Tea Assam was purely emotional at a time when FMCG majors like Hindustan Lever and Tata Tea were selling gardens.

There are good reasons why Khaitan's decision could be a purely emotional one. Long back, Deepak Khaitan had lived in two of Magors' tea estates for two months each.

It was here that he learnt the ropes of tea business. Brij Mohan Khaitan's association with the Magors dates back to 1933 when Philip Magor's father Richard Magor introduced him to the group.

"Briju" Khaitan (as he is popularly referred to) supplied tea chests and fertilisers to the company and had become a friend of Pat Williamson, a grandson of JH Williamson, one of the founding members of Williamson Magor & Company.

In 1961, a crisis loomed over Williamson Magor & Company when an investor acquired nearly 25 per cent stake in Bishnauth Tea Company, the flagship in the Williamson Magor tea estates.

The Khaitan family provided money to buy out the investor's stake. The white knight, Brij Mohan Khaitan, was invited to join the board of the company.

Brij Mohan later went on to become the managing director of the group.

Sources close to Khaitan say the decision may have been a partly emotional one but one that made a lot of business sense too. The entire industry will be dominated by one single company and volumes also meant economies of scale and rationalisation of costs.

Also, the Khaitans believed that the forte of the family was in running plantations and managing them. Khaitans have managed these gardens for a very long time and know them like the back of their hands.

"The plantations of the two companies followed the same manufacturing policies over the years," said a source. Magors' estates were believed to be the best after Khaitans' own estates in Assam.

It was no surprise that the split between the Magors and Khaitans was short-lived. The arrangement prior to the split was that Khaitans used to manage the gardens for Magors.

Now they have acquired them. There couldn't have been a better homecoming for Deepak Khaitan.