Tata Global mulls restructuring, sale of China ops

Tata Global Beverages (TGBL) is exploring multiple options, including restructuring or sale, for its China operations.

TGBL chairman Cyrus Mistry acknowledged the company has had challenges in China operations. “We continue to have those and the reason was from a production perspective,” he said to a shareholder query on the issue at the TGBL’s annual general meeting.

The obligations on account of the China business were around ~5 crore per annum. “For China, we are exploring different options, which could be restructuring or sale, but these are still in the exploration stage,” Mistry said.

The firm’s annual report also mentioned various options were being evaluated for restructuring the business of Zhejiang Tata Tea Extraction Company (ZTTECL). The joint venture (JV) had liabilities of ~114.5 crore and loss after tax of ~15.3 crore on a turnover of ~3 crore till December 31, 2015.

“Delays continue in stabilisation of the China business. While prospective customers have shown interest in our instant tea products, the final conversion to orders will be dependant on meeting the product profile requirements. Going forward, stabilising the production process and establishing a pipeline of external customers and successful scaling of technology will be key to the success of the project,” the annual report said.

ZTTECL is a 70:30 JV, with TGBL holding 70 per cent stake and ZTTECL holding 30 per cent. The JV was signed in 2007, with the aim of setting up a manufacturing facility for green instant tea, tea po ly phenols, tea concentrate sand other value added tea products.

There were other challenges as well, especially with the water vertical. “Water is something with which we had many challenges and we have actually looked and introspected about how we can do it slightly differently. So, we are giving it another chance to see how we can look at the water vertical,” Mistry said.

To elucidate, Mistry explained the philosophy of the Tata Group. “Part of the DNA of the Tata Group and TGBL is to continuously push barriers and see where we can actually grow. And, with it, will come some successes and some failures. But, I think, it is also important to move forward at some failures and look at whether there are other alternate ways to make it succeed. Then at some point, we have to call it a day,” he said.

On buyouts that have been an integral part in the group’s growth process, Mistry laid bare his views. “We should not be unabashed to make aggressive acquisitions. But we must also be clear that if we don’t get it at the right price and if it doesn’t fit the right perspective, we should not be shy to let it stop,” he said.