Tatas plan expansion, eye all-round play in India's FMCG sector

Besides food and beverages, the Tata group will get into home and personal care business

The demerger of the consumer products business of Tata Chemicals, including food brands Tata Salt and Tata Sampann, into Tata Global is the first of the group's bid to expand its presence in the fast-moving consumer goods (FMCG) segment. 

The second leg will see the Mumbai-based conglomerate use a little-known detergent called Tata Dx to get into home care, top sources have told Business Standard. It will also get into personal care, they said, as part of the diversification plan in FMCG. 

People in the know say the new name of Tata Global, which is Tata Consumer Products, was given keeping in mind the firm's larger interest in the sector. Post demerger, Tata Global will see its turnover rise 25 per cent to Rs 9,099 crore with earnings before interest tax depreciation and amortisation (Ebitda) at Rs 1,154 crore. 

Under the demerger process, 114 shares of Tata Global will be issued for every 100 shares of Tata Chemicals, taking the latter's post-demerger share base to 920 million from 631 million now. Also, Tata Chemicals will see its revenue (including inter-segment sales) decline by 15 per cent to Rs 10,336 crore. 

"Calling it Tata Global Food and Beverages would have limited its prospects to certain segments only. The name Tata Consumer Products, on the other hand, has no such limitations. The group will be able to expand and experiment a lot more in FMCG under this name, which is important if it has to grow in the sector," an official said. 

Harish Bhat, brand custodian, Tata Sons, said in a conference call following the announcement on Wednesday that the demerger was actually an amalgamation of the FMCG businesses of the two companies (Tata Global and Tata Chemicals) and the idea was to ensure that synergistic units came together. 

Tata Dx, which was launched as a pilot in West Bengal during the March quarter by Tata Chemicals, has been transferred to Tata Global as part of the demerger exercise. The product will be taken national and may see many more formats such as liquid detergents, home cleaners etc. in the future. 

The move to get into home and personal care will also pit the salt-to-software major with another Mumbai-based firm Hindustan Unilever (HUL), which gets around 75 per cent of its revenue from the segment. Home and personal care remains one of the most competitive categories in FMCG with most players from Godrej to Dabur, Proctor & Gamble, Marico, Emami and Jyothy Labs marking their presence.

Tata Global will also be able to extract nearly Rs 150 crore of synergies from the demerger over the next 18-24 months, which is 2-3 per cent of the combined branded business, the company said. These synergies will improve Ebitda of the combined business.

Tata Chemicals will continue to manufacture Tata Salt, while the brand will now be owned and marketed by Tata Global. Tata Chemicals will also have a smaller but "focused" portfolio, including a presence in chemistry and specialty products such as soda ash, bicarbonate and silica.

 

MAKEOVER PLAN

• Tata Dx has been transferred to Tata Global. The product will be taken national and may see formats such as liquid detergents, home cleaners, etc
• Tata Global will be able to extract nearly Rs 150 crore of synergies from the demerger over the next 18-24 months
• Tata Chemicals will continue to manufacture Tata Salt; brand will be owned and marketed by Tata Global
• Tata Chemicals will have a smaller but "focused" portfolio, including a presence in chemistry and specialty products such as soda ash, bicarbonate and silica