The Tata Group is set to combine its consumer goods business into a single unit as a part of the ongoing group-wide restructuring undertaken by chairman Natarajan Chandrasekaran. As a part of the plan, Tata Chemicals will demerge its consumer products business into Tata Global Beverages, thus combining brands like Tata Salt, Tata Sampann, Tata Tea and Tetley under a single umbrella.
The move, which will see Tata Global Beverages being renamed as Tata Consumer Products, will create a focused consumer products company with a combined revenue of Rs 9,099 crore and EBITDA (earnings before interest, taxes, depreciation and amortization) of Rs 1,154 crore.
Under the deal, each shareholder of Tata Chemicals will get 1.14 new equity shares of Tata Global Beverages for every one share held of Tata Chemicals. Thus, a person holding 100 shares of Tata Chemicals will receive 114 shares in Tata Global Beverages. On Wednesday, Tata Chemicals shares ended 2.9 per cent lower at Rs 557.40 on the BSE. Tata Global, on the other hand, closed 0.8 per cent lower at Rs 198.75.
"Tata Consumer Products consolidates our current presence in food and beverages in the fast-growing consumer sector. Through this combination, we have created a strong growth platform to meet the growing aspirations of Indian consumers," said Chandrasekaran.
The combined consumer business will benefit from a reach of over 200 million households, a broader portfolio to deepen distribution, enhanced innovation capabilities, as well as a strong product pipeline. Additionally, substantial revenue and cost synergies are also expected.
"This transaction is consistent with our strategy to deepen our India presence and transform into a broader FMCG player. Existing Tata Global Beverages shareholders will benefit significantly as the consumer products business increases our exposure to high growth product categories and provides a strong platform to seize new opportunities in this sector," said Ajoy Misra, MD and CEO of Tata Global Beverages.
Tata Chemicals, on the other hand, gets to unlock value of its consumer business, even as its shareholders will retain ownership in a company with a portfolio of products in basic and specialty chemicals.
"In line with its strategy to be a leading science-based solutions company, Tata Chemicals will aggressively grow its specialty chemistry business in the areas of agro science, nutrition science, material science and energy storage science," said R. Mukundan, MD and CEO of Tata Chenicals.
Chandrasekaran took over as the chairman of Tata Sons, the holding company of Tata Group, in February 2017. The $110-billion Tata Group is a diverse mix of companies, ranging from software services, consumer goods, metals, automobiles and jewellery to aerospace and defence. Under the 'One Tata' strategy, the plan is to simplify the group structure, dividing the conglomerate into 30 companies under 10 business verticals.