Tata Consumer Products (TCPL) is reorganising its business to simplify the structure and reduce the number of legal entities. This is to create focused verticals, enable faster execution and unlock significant financial value in the process.
As part of the exercise, the company is restructuring to combine Tata Coffee’s business into Tata Consumer and its wholly-owned subsidiary, and purchase a non-controlling interest in Tata Consumer UK Group through a preferential issue of equity shares. During the year, TCPL announced the re-organisation plan with two key steps, which included a composite scheme of arrangement with Tata Coffee and the purchase of non-controlling interest held by Tata Enterprises Overseas AG (TEO) in Tata Consumer Products UK Group (TCP UK) — its subsidiary in the UK.
The composite scheme of arrangement includes the demerger of the company’s plantation business, Tata Coffee (TCL), into TCPL Beverages & Foods — a newly formed wholly-owned subsidiary of Tata Consumer. The second part of the restructure includes the merger of the remaining business of TCL, comprising of the extraction and branded coffee business, with TCPL.
Additionally, the company proposes to purchase a non-controlling interest in TCP UK, by way of a share swap, through a preferential issue of its equity shares. Currently, TCPL holds 89.85% of the share capital of TCP UK, and the balance 10.15% stake is held by TEO. Through this transaction, the company intends to purchase this non-controlling interest and the purchase consideration is to be paid through the preferential allotment of shares of Tata Consumer to TEO, based on an independent valuation by a registered valuer and subject to other regulatory approvals.
“This will simplify the legal structure, create focused business verticals, and unlock synergies. We are looking at further simplification and consolidation of operations to reduce the effective number of legal entities over a period of time,” the company said in its annual report for 2021-2022.
These initiatives will enable simplification of the group structure — with one listed entity instead of two separate ones earlier, helping the company drive synergies in the organisation, unblock market potential and increase operational control, by consolidating the tea and coffee extraction business.
“We plan on significantly reducing the number of operational entities at Tata Consumer group over a period of next few years as part of our simplification agenda,” it said.
Sunil D’Souza, managing director & CEO of Tata Consumer, said the company had made substantial progress in accelerating core business, driving digital and innovation, unlocking synergies, creating a future-ready organisation, exploring new opportunities, and embedding sustainability.
“We are strengthening our core businesses of salt and tea by expanding distribution, investing in our brands, accelerating innovation, and driving premiumisation across categories. As a result of our efforts, there was significant growth in value-added variants in tea and salt. We are expanding our presence and our direct reach is poised to reach 1.5 million outlets in the next year,” he said.
He highlighted that the company is focusing on new and alternate channels.
“We are now working on transforming our supply chain to unlock efficiencies and make it future-ready. Digitalisation across the value chain and organisation is well underway,” he said.