TGBL will be renamed as Tata Consumer Products Limited and expects the combined entity to reach over 200 million households.
Tata Chemicals (TCL) said it will transfer its consumer products business to Tata Global Beverages (TGBL), according to a May 15 release filed with the exchanges.
The release also noted that TGBL will be renamed as Tata Consumer Products Limited, and expects the combined entity to reach over 200 million households.
"The proposed transaction will create a focused Consumer Products Company with a combined turnover and EBITDA of Rs. 9,099 crore and Rs. 1,154 crore respectively, for the twelve months period ended March 31, 2019, on a proforma basis," said the release.
According to the scheme, each shareholder of TCL will get 1.14 new equity shares of TGBL for every 1 equity share held in TCL, meaning that a shareholder holding 100 shares in TCL will receive 114 shares in TGBL.
The company cited revenue benefits and cost synergies, supply chain opportunities, operational improvements, and the alignment of its logistics infrastructure as the rationale for the transfer. The transfer also aimed at leveraging distribution networks and bringing about economies of scale.
“The scheme enhances the financial profile with higher growth, margin expansion and increased cash flows that will provide further headroom for inorganic growth opportunities in India and abroad,” it said.
The release also noted that the Tata Chemicals' consumer products business includes the sourcing, packaging, marketing, distribution and sales of vacuum evaporated edible common salt for human consumption, spices, protein foods, and other foods and products. The transfer is also expected to combine key brands such as Tata Salt, Tata Tea, Tata Sampann and Tetley under a single umbrella.
Brand experts say
N Chandramouli, CEO of Trust Advisory Research, a brand insights company, says, “The move of moving the Tata Chemicals' consumer products under a single umbrella under Tata Global Beverages makes sense principally from a marketing and brand point-of-view as the organizational thinking and learning becomes more consumer-centric bringing synergies of a common F&B category.”
He further said the merger was long overdue, as some Tata Chemicals' products were actually looking as misfits under the company before the transition.
“There are also profitability objectives that would get enhanced due to similar logistics and distribution efficiency of the F&B category. Also, with a lot of sales also going the e-commerce way, the brands will find a better consumer connect,” he added.
Harish Bijoor, brand Guru and Founder, Harish Bijoor Consults Inc said the demerger and merger in one is a move to define businesses with greater clarity and focus.
“N Chandrasekaran's vision is all about defining competencies and making companies specialize in those competencies,” he added.
According to Bijoor, the competence of Tata Chemicals is defined to be chemistry, science, and manufacturing.
The competence if TGBL and the new entity TCPL is defined to be sales, distribution marketing, branding, and consumer innovation.
Analysts are of the view the merger has opened up a larger canvas for the merged company in terms of positioning in the FMCG universe.
The merger will also help in product extension, and scope for being a full-fledged consumer company
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