Tata Global Beverages Ltd (TGBL) has entered into an agreement to acquire the branded tea business of Dhunseri Tea & Industries Ltd for about ₹101 crore.
The proposed acquisition is subject to due diligence, the signing of definitive binding agreements and applicable shareholder, statutory or regulatory and other third-party approvals, TGBL said in a notification to the stock exchanges on Tuesday.
For the quarter ended March 31, 2019, TGBL’s consolidated revenue from operations grew nearly 5 per cent to ₹1,755 crore, compared to ₹1,688 crore in the same period last year.
Dhunseri Tea operates in the branded tea business under the Lalghoda and Kalaghoda brands. These are among the leading local brands in Rajasthan, a market dominated by local players.
According to CK Dhanuka, Chairman, Dhunseri Tea, the company’s branded tea business accounted for nearly ₹70 crore of its overall turnover of ₹177 crore as of March 2018.
However, the sale of the business will only impact the turnover by 8-10 per cent as the tea that went into the packets would remain with the company, he said.
The focus of the company, moving forward, would be on scaling up its plantation business.
“It is difficult to grow the packaged tea business, so we are looking to exit it. The idea is to concentrate more on plantation,” Dhanuka told BusinessLine.
The company produces close to 21 million kg (mkg) of tea through its estates spread in India and Africa. The aim would be to add 5-10 mkg of plantation this year. This would be by way of acquisition of estates in Africa.
“My vision was to take the branded tea business to around ₹300 crore but that calls for a different set of expertise. If a company like Tata takes it over then they can easily scale up the brand as they have the distribution network and expertise,” he said.