 "Tata Global Beverages to explore restructuring or selling China operations")
Tata Global Beverages (TGBL) is exploring multiple options, including restructuring or sale, for its China operations.
TGBL chairman, Cyrus Mistry, acknowledged that the company has had challenges in China operations. “We continue to have those challenges and the reason was from a production perspective,” he said, responding to a shareholder query on the issue at the TGBL’s annual general meeting.
The obligations, on account of the China business, were around Rs 5 crore per annum. “For China, we are exploring different options, which could be restructuring or sale, but these are still in the exploration stage,” Mistry said.
The company’s annual report also mentioned various options were being evaluated for restructuring the business of Zhejiang Tata Tea Extraction Company (ZTTECL). The joint venture had liabilities of Rs 114.54 crore and loss after tax of Rs 15.34 crore on a turnover of Rs 3.08 crore till December 31, 2015.
“Delays continue in stabilisation of the China business. While prospective customers have shown interest in our instant tea products, the final conversion to orders will be dependant on meeting the product profile requirements. Going forward, stabilising the production process and establishing a pipeline of external customers and successful scaling of technology will be key to the success of the project,” the annual report said.
ZTTECL is a 70:30 joint venture (JV), with TGBL holding 70 per cent stake and ZTTECL holding 30 per cent. The JV was signed in 2007, with the aim of setting up a manufacturing facility for green instant tea, tea polyphenols, tea concentrates and other value added tea products.
There were other challenges as well, especially with the water vertical. “Water is something with which we had many challenges and we have actually looked and introspected about how we can do it slightly differently. So, we are giving it another chance to see how we can look at the water vertical,” Mistry said.
More From This Section
Water, he said, had seen a significant top line growth and now that has to translate to bottom line growth.
To elucidate, Mistry explained the philosophy of the Tata Group. “Part of the DNA of the Tata Group and TGBL is to continuously push barriers and see where we can actually grow. And, with it, will come some successes and some failures. But, I think, it is also important to move forward at some failures and look at whether there are other alternate ways to make it succeed. Then at some point, we have to call it a day,” he said.
On acquisitions that have been an integral part in the group’s growth process, Mistry laid bare his views.
“We should not be unabashed to make aggressive acquisitions. But we must also be clear that if we don’t get it at the right price and if it doesn’t fit the right perspective, we should not be shy to let it stop,” he said.
In 2000, Tata Global Beverages (then Tata Tea) had bought Tetley for £271 million, what was then the first leveraged buyout by an Indian company.
In 2007, Tata Steel bought Corus in a $12-billion deal, the biggest foreign acquisition by an Indian company.
For Corus, in fact, Tatas had to pay a premium of 34 per cent to the original offer price to ward off a challenge from Brazilian miner and steelmaker, CSN.
In 2008, Tata Motors acquired the Jaguar Land Rover businesses for $2.3 billion. Not all acquisitions have worked well for the group though Mistry’s comments were made in a different context altogether.
On Tata Global’s plans going forward, Mistry believes the company should take a bolder step in the coffee business. “Coffee as a percentage of our total product portfolio has to increase. We would look at largely organic but also inorganic avenues of growing that area,” he said.
A shareholder asked about foraying into dairy and Mistry said there was an opportunity in the dairy segment in India. “From time to time, we explore such opportunities to see whether it would help us grow. But there is nothing on the table at the moment,” he said.
Rest assured, we are apolitical: Cyrus Mistry
Opportunities must show themselves for the Tata Group to invest more in Bengal, Tata Group chairman, Cyrus Mistry said on Wednesday.
“I must assure you, we are clearly apolitical, we don’t partake in politics. For us, West Bengal has a special part in our heart and history and we will always look at West Bengal as a place to grow. I think, the opportunities should show themselves and when they do, irrespective of the political environment, we will make that decision to invest.”
Mistry’s comments on the group’s apolitical stance were in response to a shareholder query on rising about politics and investing in Bengal.
It is not clear what place Bengal has in Tata Group’s history. But in 2006, Tata Motors had cited its Nano car factory in Singur, Hooghly. With strong opposition from a section of people whose land had been taken over for it, mobilised by the present ruling party, Tata Motors had to finally retreat in 2008, shifting the entire factory to Gujarat.
The site remains abandoned and the case is pending verdict in Supreme Court. That is one slice of history.
Mistryspeak on Tata Group’s philosophy
“Growth will come with its share of successes and failures”
“Look at failures, if there are no alternative ways to grow, call it a day”
“Make aggressive acquisitions, but at the right price and in the right perspective”