Tata Global Beverages to retain shares in loss-making plantations

Decision comes amid a regular review being conducted on its businesses across the globe

Although Tata Global Beverages Ltd (TGBL) has decided to put its entire global performance, including India, under continuous review to focus on returns on investment. The company will not be diluting its stake in the two plantation associates that are under financial stress.

Recently, the company took a call to exit the loss-making Russian and Chinese businesses, while putting its east European operations under close review.  However, taking a reverse stance on the issue the firm has now decided to hold on to the loss-making Indian associates and make them profitable.

During the company's 54th Annual General Meeting, its chairman, N Chandrasekaran, while responding to a shareholder's query said: "It is a tough one and continues to lose money. We will take a call on both the plantations."

However, he later clarified that the company has no plans to dilute its holding in Amalgamated Plantations Pvt Ltd (APPL) and Kanan Devan Hills Plantation Company Private Limited (KDHP).

TGBL's share in APPL stands at 41.03 per cent, while in KDHP, the Tata Group company has a 28.52 per cent stake. In the financial year 2016-17, TGBL incurred a Rs 15.24 crore loss from APPL, while from KDHP it suffered losses to the tune of Rs 0.37 crore.

During 2015-16, APPL's net losses stood at Rs 23.42 crore- up by 70 per cent when compared to the year before.

"We have to understand all subsidiaries. Some are loss-making for a long time, while some are not profitable. In APPL, we have to address the profitability and review how to make it profitable," he said.

APPL, which is India's second largest tea-producing company, produces around 40 million kilograms (mkg) of tea and KDHP production stands at around 22 mkg. TGBL, which is the country's largest tea company, bought tea worth Rs 89.89 crore from KDHP last year, while the procurement from APPL stood at Rs 125.75 crore.

In the wake of a "continuous review", Chandrasekaran added that although the company's operations in the United Kingdon (UK) will continue to remain under stress on account of Brexit, it doesn't have plans to quit this market. The EMEA region, of which Poland, Czech Republic, UK and Russia are among the member nations, saw a 5.5 per cent dip in its revenue at Rs 1,547.60 in the previous financial year. This part of the geography contributes 26 per cent of the company's branded revenue with the UK accounting for 90 per cent of its earnings.

"However, we will prune our portfolio and focus on returns, besides taking steps to avoid markets where we have marginal growth", he added.

In Russia, where TGBL sold off the assets to Skodnya Grand recently, the company was incurring Rs 29-crore loss. The firm had a market share of around 2-3 per cent in the country.