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Feb 17 2007 12:00AM
Tata Tea to offload northern estates
Continuing with its move to position itself as a beverage marketingcompany, Tata Tea is set to divest 80 per cent in its North IndianPlantation Operations (NIPO), which is being spun off to a handful ofinvestors and workers.The value of Tata Tea's 80 per cent stake in NIPO, comprising 24 estates inWest Bengal and Assam, is pegged at Rs 290 crore, with the entity's totalvaluation at Rs 359 crore.With this, the company will detach itself from plantation management. Twoyears ago, Tata Tea handed over the management of its south Indianplantations to its workers. The management of the company will be vestedwith the workers and Tata Tea will handle the marketing and distribution ofNIPO's produce.The separation of NIPO is expected to be effected from April 1, 2007.The broad contours of the plan, to be announced next week, indicate thatWashington-based International Finance Corporation (IFC) and ILFS will eachpick up a 20 per cent stake in NIPO. It will be IFC's first overseasinvestment in the plantation sector.Mumbai-based Assamese consultant Ranjit Barthakur's Globally ManagedServices (GBS) is likely to pick up 10-15 per cent and the workers of the24 estates another 15 per cent. The balance will be held by a couple ofagri-companies.The agri-companies are being roped in to cash in on Tata Tea'smulti-cropping activities, so that NIPO emerges as an agricultural companywith tea as its mainstay.A back-of-the-envelope calculation suggests that IFC and ILFS will paynearly Rs 72 crore each for their acquisition, while GMS will pay Rs 36-54crore, depending on the size of its shareholding. The workers will have tochip in with Rs 54 crore, which they will finance through loans from thecompany spread over 5-10 years.A trade union source said Tata Tea had asked workers to pay Rs 8,000 each,the staff to chip in Rs 15,000-20,000 each and managers Rs 1-1.5 lakh eachfor their equity acquisition.Although a Tata Tea spokesperson declined to comment, sources familiar withthe matter said all the parties were expected to sign on the dotted linenext week.Trade union sources added that Tata Tea's management had taken workers tosouth India to show them Kanan Devan Hills Plantation, which was formed bycarving out the south Indian operations of the company and was beingmanaged by workers. Tata Tea still holds 18.2 per cent in Kanan Devan.Bankers said the valuation of NIPO was higher than its turnover as it hadthe potential to concentrate on tea as the main crop, as well as diversifyinto other cash-rich crops.After the separation of NIPO, IFC may provide grants for training workers.GMS is expected to help the company grab opportunities in Assam.|
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