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Rediff.com  » Business » Tata Tea ropes in workers to run North gardens

Tata Tea ropes in workers to run North gardens

March 26, 2007 11:46 IST

After authoring a sweet success story by giving the management of its Kannan Devan tea gardens in Munnar, Kerala, to the workers, Tata Tea is planning to replicate the experiment in the North India plantation operations.

Continuing with its move to position itself as a beverage marketing company, Tata Tea is set to divest 80 per cent in its North Indian Plantation Operations, which is being spun off to a handful of investors and workers.

The value of Tata Tea's 80 per cent stake in NIPO, comprising 24 estates in West Bengal and Assam, is pegged at Rs 290 crore (Rs 2.9 billion), with the entity's total valuation at Rs 360 crore (RS 3.6 billion).

With this, the company will detach itself from plantation management. Two years ago, Tata Tea handed over the management of its south Indian plantations to its workers.

The management of the company will be vested with the workers and Tata Tea will handle the marketing and distribution of NIPO's produce. The separation of NIPO is expected to be effected from April 1, 2007.

According to sources, Tata Tea has created a new company - Amalgamated Plantations Ltd - for this purpose. The new company with the enterprise value of Rs 360 crore (RS 3.6 billion) will have equity participation from International Finance Corporation and IL&FS, both of whom will hold a 20 per cent stake each.

Tata Tea will hold 20 per cent while a minority stake will be held by globally managed services and employees spread across its North Indian and West Bengal plantations, around 15-20 per cent.

According to sources, IFC and ILFS will pay nearly Rs 72 crore (Rs 720 million) each for their acquisition, while GMS will pay Rs 36-54 crore (Rs 340-540 million), depending on the size of its shareholding. The workers will have to chip in with Rs 54 crore (Rs 540 million), which they will finance through loans from the company spread over 5-10 years.

Trade union sources said Tata Tea had asked workers to pay Rs 8,000 each, the staff to chip in Rs 15,000-20,000 each and managers Rs 100,000-150,000 each for their equity acquisition.

Trade union sources added that Tata Tea's management had taken workers to south India to show them Kannan Devan Hills Plantation, which was formed by carving out the south Indian operations of the company and was being managed by workers.

Tata Tea still holds 18.2 per cent in Kannan Devan.

Bankers said the valuation of NIPO was higher than its turnover as it had the potential to concentrate on tea as the main crop, as well as diversify into other cash-rich crops.
Commodity Online