By March 2020, Tata Global Beverages Ltd. (TGBL) expects to become Tata Consumer Products Ltd., emerging as an FMCG company with a portfolio of food products and marking a significant expansion beyond its present play in the beverage segment only.
It is now undergoing the process of a scheme of arrangement with Tata Chemicals Ltd. (TCL).
“We expect an expeditious closure (of the scheme).…before March 2020, but not everything is in our hands,” Ajoy Misra, managing director and CEO, TGBL, told The Hindu after addressing shareholders at a meeting convened by the National Company Law Tribunal. Under the proposed arrangement, TCL’s consumer products business will be demerged in favour of TGBL. This will enable TGBL, which now has major brands such as Tata Tea and Tetley, to add to its portfolio, the foods brands of TCL like Tata Salt and Tata Sampann.
“Tata Sampann is a nascent brand selling lentils and spices, with huge potential,” Mr. Misra said adding, “the basket will include items like unpolished lentils and low oil absorption spices. New categories will also be TGBL is a global company and there is an export market for all these products, he told shareholders. The results of the merger are expected to flow to the new company within 18 months post regulatory approvals. Efforts will be made to hit the ₹10,000-crore-mark in turnover [from about ₹7,251 crore for TGBL in 2018-19], executive director and group CFO L. Krishnakumar told The Hindu .
While about 300 employees of TCL would be part of the new company’s sales and distribution team, manufacturing facilities would remain with TCL with products being sourced through purchase agreements.
The scheme’s benefits would be reaping cost and revenue synergies with multiplier effect. “TCL has huge innovation facilities which will help in new product development,” said Mr. Misra said. The deal cost is pegged at about ₹10 crore.
While most of the shareholders supported the move, some were apprehensive about the benefits and wanted to know about the strategy for FMCG expansion.
The meeting was chaired by Siddharta Mitra, senior advocate and bar-at-law, who was appointed for the meeting. The share swap ratio is 114 shares of ₹1 each of TGBL for every 100 shares of TCL of ₹10 each.
