Tata Tea Ltd is considering rebranding the Himalayan brand of mineral water it acquired after picking up a 25.77% stake in Mount Everest Mineral Water Ltd so as to reflect the fact that the brand is now owned by one of India’s most recognized corporate houses, the Tata Group.
Tata Tea has applied to stock market regulator Securities and Exchange Board of India (Sebi) for permission to make an open offer to acquire 20% more in Mount Everest from public shareholders in keeping with Indian laws. The price it has suggested for the open offer is Rs140 a share.
On Tuesday, the stock closed at Rs131.6 on the Bombay Stock Exchange. Institutional investors including Goldman Sachs, Morgan Stanley and Singapore-headquartered fund Matterhorn Ventures hold a 28.94% stake in Mount Everest.
Tata Tea has named Pradeep Poddar as the chief executive officer of the company. It will reconstitute the board of directors of the company in August when the open offer closes. “The Tata branding, too, will happen after that,” says a senior executive familiar with the entire process, who cannot be named.
Mount Everest relied on word of mouth and institutional sales to popularize the brand. Tata Tea has already dropped the “Discovered by Dadi” logo that was part of Himalayan’s branding. Himalayan was launched by non-resident Indian entrepreneur, Dadi Balsara.
The firm is likely to use the Tata brand instead. The use of the Tata brand is covered by the provisos of the Tata Brand Equity Scheme, which also requires Tata Sons, the main holding company of the group, to be compensated for use of the brand.
Using the Tata brand will help because ordinary Indians see it as a hallmark of trust, say analysts. What’s more, unlike brands such as Parle’s Bisleri, which resonate more in western India, the Tata brand has a national reach, experts say.
Tata Tea has been using its distribution clout to get major retail chains to stock Himalayan, which is priced at Rs25 per litre, almost a 100% premium to other bottled water brands.
“Now that we have management control, there are big plans to scale up this business,” says a senior executive at the Tata group.
India’s packaged drinking water market is growing at 25% per annum and is estimated to be worth Rs1,100 crore a year.
Mount Everest’s board currently includes Salim Govani and Vinod Sethi, the promoters, and three independent directors, Jai Shroff, Raj Vaisohaelhi and Rohit Aggarwal.
While Sethi and Govani will have the rights to nominate two members to the board as long as they own at least 5% stake in the company, Tata Tea will have the right to nominate five of its representatives and the independent directors on the board.
According to people close to the matter who do not wish to be identified, Tata Tea is keen that Govani and Sethi continue on the board as co-promoter directors, and that Tata Tea vice-chairman R.K. Krishna Kumar assume charge as chairman of the company.