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Tatas May Spin Off Water Business
Prasad Sangameshwaran
Rediff
February 12, 2007
Mumbai: The Tata group is looking to spin off its bottled water business
into a separate company.
The group's bottled water business currently includes a 30 per cent
stake in US' third largest bottled water company Energy Brands Inc.
The group is also believed to be in talks to acquire Dadi Balsara's
Himalayan water brand. A top team headed by R K Krishna Kumar is working
out the details of the acquisition, say sources.
Energy Brands is an associate company of the group in which Tata Tea
holds a 25 per cent stake, while the remaining 5 per cent is held
by a subsidiary of the group's holding company, Tata Sons. The Tata
group had acquired this stake for roughly Rs 3,100 crore (Rs 31 billion)
last August.
As the group scouts for more acquisitions in the bottled water business,
the subsidiary of Tata Sons that holds the Glaceau stake is expected
to play a greater role. A Tata group spokesperson said the group did
not want to comment on the matter.
A section of analysts said the spin-off could help the group minimise
the impact of the Glaceau acquisition on the balance sheet of Tata
Tea, more so as the group had the right to increase its stake in Glaceau
to 40 per cent.
In the last quarter ended December 31, the interest on the Rs 763.39
crore (Rs 7.63 billion) loan taken to part-finance the acquisition
was Rs 12.41 crore (Rs 124 million).
Tata Tea, which has executed the acquisition through its UK-subsidiary
Tata Tea GB, has been selling its investments in group companies and
restructuring its plantation business to repay the loan.
A Mumbai-based analyst said that if the group could have two retail
companies, Trent and Infiniti, to manage its retail operations, the
same logic could apply to beverages.
Trent, a publicly listed company, manages the Westside chain of departmental
stores, apart from the foray into supermarkets, while Infiniti launched
the group's diversification into durables retail through the Croma
chain of stores.
However, a consumer goods analyst said that the flavoured water business
acted as a hedge against the decline in black tea consumption in developed
markets.
"The ideal combination is to develop a complete spread of offerings,
from tea and coffee to water, under a single company, to cover the
entire spectrum of beverage consumption," he said.
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