- The deal value is up to Rs 101 crore ($14.5 million), the Tata Group company said in a stock-exchange filing.
- With the sale, Dhunseri has also assured TGBL steady supply of tea for these two 25-year-old brands.
- Dhunseri failed to strike a deal on McLeod Russel’s tea estates in Africa.
Two brands of Dhunseri i.e, Lalghora and Kala Ghoda came together and made 5% of the total branded tea market and market leaders in Rajasthan.
Tata global beverages have come into an agreement to buy tea business of Dhunseri tea and industries for rs.101 crore after the latter decided to quit the branded tea business and focus on strengthening its plantations business in Africa instead. Dhunseri entered into a non-binding term sheet on Tuesday to sell the branded tea business that was presently undertaken by the brands like Lalghora and Kalaghora. Together, these two brands makeup five percent of the total branded tea market and are top market leaders in Rajasthan.
The packet tea business is a different ballgame and plantations is another and we know our strengths. We are on the lookout to buy more plantations in Africa,” said the chairman of Dhunseri tea and industries, Mr.CK Dhanauka.
In India, the total tea production by Dhunseri tea and industries was 10.07million kg in the fiscal year 2017-2018, from 10 estates in Assam, and 8.70 mkg from its African operations from only two estates. At Rs 110.07 crore in the 2017-18 fiscal year, African operations accounted for over 34 percent of Dhunseri’s annual earnings.
Over the past 4 years, the average price realization of Dhunseri from packet tea is improving by just over two percent. In the 2017-18 fiscal year, the average price realization from this business stood at Rs 217.29 a kilo.
The company was also eyeing the assets of Assam company ltd, which was undergoing insolvency proceedings. Here it lost out to Abu Dhabi-based BRS Ventures which paid a staggering Rs 1,214 crore.
Now as production costs have scaled to new highs in Assam so Dhanauka is more focused in acquisition on tea estates in Africa, and the presence of numerous small tea growers in Assam has been resulting in the larger tea estates losing its cost competitiveness.
In last annual general meeting of TGBL’s, its chairman N Chandrasekaran told to shareholders that TGBL’s progression in India would be via a mix of organic and inorganic growth and capture the growth in the Indian market.
“In volume terms, we continue to be no.1 in the Indian market, in value terms we can’t say the same thing so, our focus is there to bring growth in the Indian market by a combination of focusing on market share as well as a number of new product launches”, said by Chandrasekaran in AGM.
In separate filings with BSE, both TGBL and Dhunseri said that the proposed acquisition shall be subject to due-diligence, signing of definitive binding agreements and applicable shareholder, statutory, regulatory and other third-party approvals as may be applicable.