Eveready to vest bulk tea business with ECIL

The bulk tea business of the Brij Mohan Khaitan group will be demerged into Eveready Company India Ltd (ECIL), now a shell company.

The scheme of arrangement states that ECIL has been incorporated with the main object of carrying out the business of cultivation, production and sale of tea in bulk form.

The restructuring would enable ECIL undertake the bulk tea business with an established undertaking and lay greater emphasis on its activities.

However, ECIL is likely to be renamed McLeod Russel (India) after the approval from Registrar of Companies at a later date.

The business of manufacturing, packaging, marketing and selling of packet tea was originally part of the tea division acquired by Eveready Industries India Ltd (EIIL) upon merger of McLeod Russel with EIIL with effect from April 1, 1996.

Post-arrangement, promoter's holding in ECIL would stand at 60.55 per cent from the pre-arrangement 100 per cent.

According to the scheme, the paid-up share capital of EIIL, now consisting of Rs 55,77,90,020 divided into 5,57,79,002 equity shares of Rs 10 each fully paid up, would upon the scheme coming into effect, will be reduced to Rs 27,88,95,010 divided into 5,57,79,002 equity shares of Rs 5 each fully paid-up.

Shareholders of EIIL would be allotted one equity share of ECIL of Rs 5 each, upon the scheme becoming effective. The entitlement ratio of shares has been reached upon the basis of the valuation report of consultancy major, PricewaterhouseCoopers (PwC) and professional valuers.

The scheme also stated that consequent to the restructuring, EIIL and ECIL would become highly focused entities each specialising in distinct business segments and would be capable of independent evaluation.

It would also facilitate independent funding of the FMCG business (comprising batteries and packet tea) and bulk tea business as also suitable strategic, technological or financial alliance and participation of appropriate partners in such business.

However, Deepak Khaitan, executive vice-chairman and managing director of EIIL said that the group had no plans to induct strategic partner in the business in the short or medium term.

B M Khaitan is ECIL chairman and the other directors are R S Jhawar and K K Baheti. Analysts said, the board is likely to be reconstituted once, the scheme of arrangement became effective.