September 2009
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IL&FS backs out of stake buy in Tata Tea plantation unit

Beverage major left with 50% in ‘non-core’ business

Infrastructure Leasing and Financial Services (IL&FS) said it will not be picking up a stake in Amalgamated Plantations Private Limited (APPL), a company created in 2007 to hive off its 24 North Indian tea plantations, leaving Tata Tea with close to 50 per cent in a business in which it wanted to reduce exposure.

Hari Sankaran, managing director, IL&FS said, “After the markets went topsy-turvy, we decided not to make any new investment till the markets return to stability.” According to the original plan, IL&FS and International Finance Corporation (IFC) were supposed to buy 20 per cent each in APPL and Tata Tea was supposed to hold 20 per cent, depending on worker participation.

L Krishna Kumar, Tata Tea group chief financial officer (CFO), said Tata Tea currently holds 49.98 per cent in the company, Tata Investment Corporation 15 per cent and IFC 20 per cent. The remaining shareholding was divided among some investors and workers. Sources close to the development said APPL was looking for new investors.

APPL was incorporated to develop a portfolio of non-tea based products, apart from producing and marketing tea. However, with tea prices hitting an all-time high, APPL was exploring newer options in tea. “In the short term, we are exploring what we can do in tea, though in the long-term we will diversify,” Krishna Kumar said,

APPL was looking to diversify into a host of cash-rich crops to enhance revenue streams but had not progressed beyond the pilot stage, said sources close to the development.

Creating APPL was part of Tata Tea’s broader strategy to reduce its exposure in plantations and focus on creating global beverage brands. In 2005, it created South Indian Plantations Operations comprising 17 estates that were hived off to create Kanan Devan Hills Plantations Company, with employees as its shareholders. Tata Tea holds less than 20 per cent in Kanan Devan.

Tata Tea currently owns only two estates in South India which are managed by Kanan Devan Hills Plantations Company under a management contract. APPL has 20 estates in Assam and four in West Bengal.

Source: Business Standard

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