MUMBAI: Tata Tea Ltd. said on Monday it had formed a new company to run its north India tea plantations, in which International Finance Corp., an arm of the World Bank, and India’s ILFS will hold 20 % each.
Tata Tea, the world’s second-biggest branded tea company, will also hold up to 20% in Amalgamated Plantations Ltd., which will operate its tea plantations in the states of Assam and West Bengal.
Minority stakes will also be held by plantation workers.
The new firm, with an enterprise value of about Rs3.6 billion ($82 million), will be effective from 1 April 2007. Tata Tea will fund its stake purchase in the company with a mix of debt and equity, a senior company official said.
“We had made a strategic decision to move away from managing plantations and unlocking the value of the land to tap diverse revenue streams,” R.K. Krishna Kumar, vice chairman of Tata Tea Ltd., said at a news conference.
The new company is testing the viability of growing non-tea crops including fruits, vegetables and spices on up to 5 % of the total area under cultivation, measuring about 20,000 hectares (49,500 acres), he said.
The organisation of the north India plantations, which make up nearly half of Tata Tea’s estates in the country, follows a model adopted in the restructuring of the company’s plantations in south India a few years ago.
Tata Tea continues to hold up to 20 % in Kanan Devan Hills Plantations Co., set up in 2005, which controls its 17 plantations in the southern state of Kerala.
Tata Tea, which also owns the Tetley tea brand, will commit to buying more than three-quarters of the north Indian plantations’ annual tea output of about 35 million kg (77.2 million lb) for a period of three years.
Ahead of the news, shares in Tata Tea ended down 0.5 % at Rs672.85 in a slightly firm Mumbai market.