Tata Coffee, a subsidiary of Tata Tea, is likely to merge its wholly owned investment subsidiary, Conscofe Investments, with itself.
According to P Siganporia, deputy managing director, Tata Tea, investment subsidiaries will be folded into the commercial organisations to save on the dividend tax. Clarifying that he has not yet had a look at the minutes of Tata Coffee's board meeting, Siganporia said, it is only a matter of time before Conscofe Investments is merged with Tata Coffee.
Applying the same logic of dividend tax, Bambino Investment and Trading Company was merged with Tata Tea, last month. The merger is likely to shore up Tata Tea's reserves as Bambino is sitting on reserves of more than Rs 100 crore. Analysts said the move was critical in view of Tata Tea's expansion plans. However, Conscofe Investments posted a marginal loss this year.
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Conscofe has long-term investment in Vikrant Tyres Ltd, Tamil Nadu Petro Products Ltd, Tata Chemicals Ltd, Ritspin Synthetics Ltd and Saptarishi Agro Industries Ltd which was sold during 2000-01.
Tata Coffee, along with Conscofe Investments, sold its holdings in Saptarishi Agro, a company engaged in growing and processing of mushrooms. Due to the collapse of the world market for mushroom, the dominance of China in this market and the imposition of anti-dumping duties by the US government, Saptarishi Agro had been incurring losses and considering the above, the equity holdings was disposed of in favour of Global Green Company Ltd.
Speaking on Tata Tea, Siganporia said, the company will get out of its joint venture with Hitachi. Tata Hitachi is a 50:50 joint venture between Tata Tea and Hitachi group of Japan, for marketing beverages in that country. The joint venture was initially set up to market high quality Japanese tea and coffee market, but with the acquisition of Tetley, it will be marketed directly in that region.
Meanwhile, Tata Tea is in the process of identifying a consultant, which would facilitate the process of integrating the operations of Tetley with Tata Tea. The integration will enable Tata Tea and Tetley to operate as one company as far as operations are concerned. Tata Tea will consider merging the two balance-sheets only once the debt equity ratio is at a comfortable level.
Despite the gloom in the tea industry, the Tata Tea scrip appreciated 4.82 per cent on October 19 to Rs 139.25 on the Bombay Stock Exchange (BSE). But, in contrast, Tata Coffee was down 5.02 per cent and closed at Rs 52 on BSE, the same day.