Tata Global Beverages has exited some of its faltering overseas ventures in Russia and China to cut losses amid bleak revival scenario.
The beverages major on Thursday sold off its Russian operations including manufacturing and selling of popular Russian coffee brand Grand that it had fully acquired in 2012.
Selling off its Russian businesses, which clocked a turnover of Rs 266 crore in FY17 and suffered continued losses touching Rs 29 crore, has been sold off to Skodnya Grand and Coffee Pack of Russia, Tata Global Beverages said in a disclosure on Wednesday.
"The new owner will take over all the existing assets and operating liabilities including employees, customer and supplier contracts and will continue to manufacture and sell our existing brands and products. The transaction is subject to completion of condition precedents including regulatory approvals and is expected to close over 3-4 months," the domestic tea and beverages said in the statement without disclosing the transaction value.
While Tata Global would retain the brand, it would receive royalty against its use.
"The company's subsidiary will receive a consideration for transferring the assets and operating liabilities and a license fee for the use of the brand," it said.
Tata Global Beverages, along with East European funding agency EBRD joined hands in 2009 for a controlling stake in the Russian branding, packaging and distribution company Grand renamed Suntyco Holdings.
The consortium led by the Tatas held 51% of Grand with Tata Global holding 33.2% and the promoter holding the balance 49%.
Then in 2012, Tata Global bought out the Russian promoter with an aim to gain a foothold in that country.
The process of review of its weak global businesses started during the tenure of Cyrus Mistry, and under the current chairmanship of Chandrasekaran, the strategy to exit the businesses are now being executed.
Last Saturday, Tata Global sold off its effective stake of close to 90% in Zheijiang Tata Tea Extraction Co for about Rs 17.5 crore to its minority joint venture partner Zhejiang Tea Group.
"The decision to divest was taken mainly due to the marginal nature of the businesses and under-performances as compared to plans," Tata Global has said in FY17 annual report.
Despite investing Rs 100 crore over the last two years, the Chinese venture aimed at making a presence in green Instant Tea, tea Polyphenols, concentrates and other value added tea products, failed to take off with sales of just Rs 2.51 crore in FY17 running up losses of more than Rs 15 crore.
THE LAST SIP
- Review of its weak global businesses started during Cyrus Mistry’s tenure
- Now under Chandra’s chairmanship, the exit strategy is being executed
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