Faced with political pressure from the Assam government, Tata Global Beverages Ltd has for the time being dropped its plan to sell its 41% stake in Amalgamated Plantations Pvt. Ltd, said key officials.
On Friday, Himanta Biswa Sarma, a cabinet minister in Assam and a key lawmaker from the Bharatiya Janata Party (BJP), said on Twitter that he had spoken to Tata group chairman N. Chandrasekaran, and had been assured that the group would not sell its tea gardens.
That puts to rest all speculation about Amalgamated Plantations, said Jagjit Singh Kandal, managing director of the company. As long as Tata group remains invested in Amalgamated Plantations, it will continue to provide operational support and work towards making the company profitable, he added.
Asked what led to the change in plan, Kandal declined to comment.
At least two leading tea producers, Kolkata-based Dhunseri group and M.K. Shah Exports Ltd, had shown interest in acquiring Tata Global’s stake in Amalgamated Plantations, and held preliminary discussions with the seller. The company has 25 estates in Assam and the Dooars region of West Bengal.
“The timing was wrong," said a key Tata group official, who asked not to be identified. The search for a potential investor in Amalgamated Plantations coincided with the annual Advantage Assam business conference which took place earlier this month, according to the official.
For the BJP government in Assam, it was “embarrassing" that the Tata group was looking to exit at a time when the state was trying to bring in new investors, this person said, adding that Tata Global’s plan to sell its stake in the tea estates was “entirely a commercial decision".
In the past three years, Amalgamated Plantations made losses aggregating to Rs85 crore, according to a statement made to its shareholders last year by chairman Ranjit Barthakur. The company needs fresh injection of funds, said the unidentified Tata group official cited above.
Amalgamated Plantations produces around 41 million kg of tea a year, of which 26 million kg is from its own crop. The rest it buys from small tea growers and processes in its factories. To shore up profitability, Kandal had earlier said Amalgamated Plantations would expand its own packet tea business.
The Tata group has a consolidated stake of 65% in Amalgamated Plantations. Other than Tata Global, other group firms were also expected to cash out of Amalgamated Plantations in a phased manner.
The Tata group was looking for a “steep valuation" of around Rs500 per kg of production or an enterprise value of around Rs1,300 crore for Amalgamated Plantations, according to a person familiar with the negotiations with potential investors.
With the estates of Amalgamated Plantations not available any more, the race for Assam Co. India Ltd will further intensify, this person said, asking not to be named. Mint had reported on 5 February that at least four companies—the Dhunseri group, M.K. Shah Exports, Warren Tea Ltd and Srei Infrastructure Finance Ltd—were vying for Assam Co.’s prized estates.