Tata group FMCG arm TCPL is consolidating its business by merging various companies and plans to reduce the number of legal entities to around 23 from the existing 45 after restructuring, said its MD, and CEO. Sunil D'Souza.
This will help Tata Consumer Products Ltd (TCPL) in creating focused business verticals and unlock potential synergies between them, said D'Souza while addressing a conference call.
Last week, TCPL had announced the merger of all businesses of Tata Coffee Ltd (TCL) with itself as part of a reorganization plan in line with its strategic priority of unlocking synergies and efficiencies. While the plantation business of TCL will be demerged into TCPL's wholly-owned arm TCP Beverages, and Foods Ltd (TBFL) the remaining business of TCL, consisting of its extraction and branded coffee business, will be merged with TCPL.
According to D'Souza, the consolidation and simplification align the corporate structure with management and administrative structures and converges all the minority interests of subsidiaries into TCP level and a single listed entity.
"It creates focused business verticals and unlocks potential synergies... across the organizations like we have 45 legal entities which we are collapsing now hopefully to about 23 to 25 number. and because of this cross-holdings across we have issues on tax efficiencies, dividend repatriation, and cash traps," said TCPL .
He further said, "So we will be releasing a lot of these pieces as we go forward, significant benefits will be in the places where we have got certain businesses which are taxpaying versus some which could have tax offsets there will be some efficiencies but overall the exercise is aimed to streamline and structure in terms of driving multiple pieces."
As per their merger scheme, shareholders of TCL (other than TCPL) will receive an aggregate of 3 equity shares of TCPL for every 10 equity shares held by them in TCL. TCPL will take several steps over the next 12 to 24 months to bring down the structure.
“..after this, there is a series of steps to be taken over the next 12 to 24 months post which we will come to the 22-23 sort of number in terms of entities and the reason why we are not fixed on 22-23 is that there are various options to consider as we go forward and choices to make where we will finally land up but that said after that there is further scope for simplification beyond that," D'Souza said.
However, he also added that the thrust will be to continue to look for options to keep looking at efficiencies and bring the number of legal entities down as long as there are tangible benefits on the table in terms of either management bandwidth or cost efficiencies, he added.
After merging the consumer products business of Tata Chemicals with Tata Global Beverages, the company was renamed TCP and now owns brands like TATA Salt, TATA Tea, Tetley, Eight O'clock, Himalayan Water, Tata Water Plus, and Tata Gluco Plus.
Its food portfolio includes brands such as Tata Salt, Tata Sampann, Tata Soulfull, and Tata Q. The Tata group firm aspires to be a formidable player in the FMCG category, by expanding its play into the existing category and venturing into new areas. TCPL has a reach of over 200 million households and has an annual turnover of Rs 11,600 crore with operations in India and international markets.