Jay Shree Tea & Industries will merge its two subsidiaries -- North Tukvar Tea Company and Shiva's Group -- with itself.
Jay Shree Tea is the tea, phosphate and plywood company under the B K Birla stable.
Confirming the development, the Birla group patriarch Basant Kumar Birla said the merger was aimed at improving the performance of all the entities and enhancing shareholders' value as well.
Jay Shree Tea has a production capacity of over 15 million kg and has gardens in Cacher, Assam Valley, Tamil Nadu, Kerala, Darjeeling, Doors and Terai.
North Tukvar is a relatively small company with only three lakh production capacity and reserves of Rs 10 crore, while the Shiva's Group is engaged in the construction business.
The proposed merger of North Tukvar Tea and Shiva's Group with Jay Shree Tea is in line with the Rs 5,000 crore group's on-going restructuring exercise which hinges on bringing its subsidiaries close to the main money spinners and this in turn would generate more revenue.
Last year, the group has amalgamated 10 closely held companies and plans to merge another seven-eight privately held companies with its main manufacturing firms.
It has recently received the Calcutta High Court approval for merging Bharat General Textiles & Industries, Hindusthan Heavy Chemicals and Birla Century Finance with Kesoram Industries.
The Rs 171 crore Jay Shree Tea, which has recorded a poor show last year because of the closure of its plywood units in Andamans, has been implementing a gamut of initiatives including increasing pruning percentage in most of the estates in Cacher and Upper Assam, harvesting better green leaf, reducing reconditioning in south India, and installation of a turbine at the fertiliser unit at Pataudi. It has also completed a share buy-back programme.
The merged entity is expected to record a better topline because of the increased production of tea. It would not, however, strengthen the merged entity financially.
North Tukvar Tea Company has a paid-up equity capital of Rs 2.40 crore, while Shiva's Group has a relatively low capital base of Rs 2 lakh. Both the companies' capital bases, in all likelihood, will be extinguished following the merger.
Jay Shree Tea is trying to enhance its presence in the packet tea segment with the twin objective of reaching closer to the customers as well as enhancing realisation of better margins.
Due to demand recession and "unremunerative prices" for plywood, the company has shelved its plan of setting up a factory at Kandla Port area in Gujarat.
