Professional Documents
Culture Documents
Emami Paper Mills - Appraisal Note
Emami Paper Mills - Appraisal Note
PROCESS NOTE
(To be forwarded by Branch to Zonal Office in respect of Credit Limits of Rs.
1.00 Crore and above)
Existing Limits
Secured
Overdraft
From
other SOD-Rs.20
banks crores
Rs.89.67 crores
(Cash Credit)
Limits Applied
of
Limits
proposed
Fresh
now
SOD-Rs.20
crores
Note: It is assumed that the Term Loan enhancement proposal has been sanctioned separately .
3. Address of Factory/Unit at
West Bengal 700107, India
Limited Company
Emami Ltd.
5. Date of Incorporation
1982
6. Sector
Private
7. Line of Activity
Division
Paper Production
Line of Activity
Date
of
commencement of comm.
production
Products
Not
applicable
1. Newsprint
Not
ascertainable
Total = 1,45,000
Not
applicable
Not
ascertainable
Designation/Area
A.V. Agarwal
Manish Goenka
P.S. Patwari
M.B.S Nair
J.N. Godbole
H.M. Marda
J.K. Khetawat
S. Balasubramanian
U.G. Bhat
Richa Agarwal
S.K. Jain
S.K. Khetan
Executive Chairman
Whole time director
Executive Director
Director - Operations
Director - Operations
Director - Operations
Director - Operations
Director - Operations
Director - Operations
Director - Operations
Sr. President
President Finance and CFO
MANAGEMENT:
Chairman: Mr. Tata, B.Sc. (Architecture), AMP (Harvard) joined the Tata Group in 1962. Mr.
Tata is the Chairman of Tata Sons Limited since 1991, the apex holding company of the Tata Group
and is the Chairman of major Tata Companies and Tata Trusts. He is the Chairman of the
Investment Commission set up by the Government of India. He is also a member of several
international boards/committees. He was also on the Central Board of the Reserve Bank of India.
Vice-Chairman :Mr. Krishna Kumar, M.A. served as the Managing Director of the Company from
May 1991 to January 1998. He was appointed Vice Chairman and Managing Director in 1997. In
1998 he ceased to be the Managing Director to take over as the Managing Director of The Indian
Hotels Co. Ltd. He is also on the Boards of a number of Tata Group companies including Tata Sons
Ltd. and Tata Industries Ltd. He is also trustee of several important Tata Trusts. Mr. Krishna Kumar
is associated with the Tea industry for over 40 years. He has long experience of overall business
management of Indian and overseas corporate bodies.
Managing Director: Mr. Siganporia is a Graduate in Science and holds a Post Graduate Diploma
in Business Management from Xavier Labour Relations Institute, Jamshedpur. He joined the Tata
Group as a Tata Administrative Services Officer and was deputed to your Company in 1974. Since
then, Mr. Siganporia has held several senior positions in the marketing and sales functions of the
Company including General Manager- Packet Tea Division, Vice President Marketing and Senior
Vice President North India Plantation division before being appointed to the Board as a
Wholetime director from 16.6.2000. With effect from 19.2.2001, Mr. Siganporia was designated as
Deputy Managing Director of the Company by the Board. Mr. Siganporia has over 29 years work
experience. At present, Mr. Siganporia has the overall charge of the North India Business Division
of the Company and is also the Managing Director of the Company.
Director -Business Management & Finance.: Mr. Kavarana, B. Com. FCA (Eng & Wales) MBA,
USA has very long experience of management and administration of several large Tata companies
both in India and abroad. Mr. Kavarana oversees the insurance business of the Tata Group as
Chairman.
5
Director- Marketing:Mr. Pringle, B.Sc. (Economics) is the Vice Chairman & Chief Executive
Officer of the Tetley Group Ltd. He was earlier Marketing Director of Joshua Tetley & Sons Ltd.
He became Marketing Director of Lyons Tetley in 1988. He held several Senior Management
positions in The Tetley Group. He is the Managing Director of Tetley GB since 1995.
Addl. Director- Financial Advising: Mr. Gandhi, B.Com, FCA (England & Wales) is a reputed
Chartered Accountant and also a Member of the Chartered Institute of Taxation, London. Mr.
Gandhi as an Executive Director of Tata Sons Ltd. has been assisting the Tata Group in acquiring
diverse assets and companies across the globe. Mr. Gandhis professional career spans nearly 40
years and he has handled numerous mergers and acquisitions, both crossborder and domestic. He is
a Member of the various committees constituted by industry forums and regulatory bodies such as
SEBIs Takeover Panel Exemption Committee and the Accounting Standards Board of the Institute
of Chartered Accountants of India.
Director:Mr. Engineer, B.A. (Hons.), LL.B. is a senior Advocate and Solicitor of the Bombay High
Court and a senior Partner in Crawford Bayley & Co., a leading firm of Solicitors. He specializes in
Indirect taxation, Arbitration, Litigation and various facets of Corporate Law. He is the former
President of the Bombay Incorporated Law Society and has served on the Governing Council of the
Bar Association of India. His expertise are in the areas of laws, regulations, taxation etc. A
practising solicitor for several decades, Mr. Engineer has been associated with various Chambers of
Commerce.
Director: Mr. Malegam, Chartered Accountant, till recently was the Senior Partner of S. B.
Billimoria & Co., a leading firm of Chartered Accountants of India. Mr. Malegam is an expert on
issues relating to Finance, Taxation, Capital Market, Securities Laws and Regulations. He is a
member of the Governing Board of the Reserve Bank of India and has served many important
committees set up by the Government/SEBI as Chairperson/Member. He is the Chairman of the
National Advisory Committee on Accounting Standards set up by the Government of India. He was
the Chairman of the SEBI Committee on Disclosure Requirements in Offer Documents. Mr.
Malegam is a member of the Indian Institute of Bankers.
Director: Dr. Patel, Bachelor of Veterinary Science & Animal Husbandry, is an eminent
professional in the field of Dairy Development, Co-operatives, Rural Management, Animal
Husbandry, Ecological & Environmental matters. She is currently the Chairman of National Dairy
Development Board, Mother Dairy Fruit & Vegetable Ltd. and several other companies as
mentioned below. She has been conferred the Padma Bhushan by the Government of India.
Solicitors and Legal Advisors n/a
Auditors S.K. Agarwal & Co. Chartered Accountants
Particulars of present key personnel and the: Board Committees area supervised by
them
Audit Committee
1. Shri J. Godbole - Chairman
6
Organizational Structure:
Company
Emami Ltd. Personal and
Healthcare
AMRI Hospitals, Kolkata -
Ownership %
Not available
Majority of the present team of management is working together since 2000 and the junior level are
mostly from the TCS and during the period the company has registered impressive growth in all
financial parameter indicating that the company is managed by well experienced and capable
8
managerial personnel. There is no resignation from the current team of management professional
except due to normal retirements.
In fact, Tata Tea Limited (TTL), sensing difficult times for the tea industry in India and wishing to
become a global player, started with the current management in various different positions by
acquiring Tetley, in March 2000, a company two-and-a-half times its size. It was a first in numerous
wayshighest price of 280 mn, an Indian company acquiring a UK company, 3:1 leverage, a
ring-fenced structure and investing via a SPV. The approach chosen was to integrate processes and
explore synergies, while maintaining operational independence. Emphasis was on revenue and
growth, and not on cost reduction. The company has a common Mission-Vision-Values and a
common strategy for all its subsidiaries and associates, which are discussed under quality of
management.
Group CFO
VP Finance :
Mr. K
Venkataramanan
Chief
Internal
Auditor :
Mr. Mathai
J
DGM-Head s upply
2. Chief Executive:
Paid up Capital:
%
Shareholding
Foreign
(Promoter &
Group)
Indian
(Promoter &
Group)
Total
of
Promoter
Non Promoter
(Institution)
Non Promoter
(NonInstitution)
Total
Non
Promoter
Total
Promoter
&
Non Promoter
19088319
32.34
190883190
32.34
19088319
32.34
190883190
32.34
24758327
41.94
247583270
41.94
15159539
25.68
151595390
25.68
39917866
67.62
399178660
67.62
59006185
99.96
590061850
99.96
10
Custodians
(Against
Depository
Receipts)
23672
0.04
236720
0.04
Grand Total
59029857
100
590298570
100
5. Quality of Management
The purpose in Tata is to improve the quality of life in India through leadership in targeted
sectors of national economic significance to which the Group can bring a unique set of
capabilities. Its past success in delivering such purpose provides the basis for the belief in
the future and the role in it. The Tata Group size and scale will provide management and
financial resources to profitably, cater to the emerging opportunities and to develop globally
competitive skills to succeed in this endeavour. The long-term success requires them to
considerably focus on its portfolio, management efforts and investment priorities so that the
Group synergy is brought to bear at the point of delivering value to the customer. The
enormous Group resources : in people and finance is re-architectured so that the whole is
larger than the sum of its individual parts.
The Tatas heritage invokes trust among consumers, employees, shareholders and the
community. This is a precious heritage, unique in India, preserved and enriched by
formalising the high standards of behaviour expected from employees and the companies in
the years to come. The Tata name is a unique asset representing Leadership with Trust.
Leveraging this asset to unify its companies is the route to long-term success and delivery of
returns to the shareholder in excess of the cost of capital.
Tata TeaLtd. -Vision-Mission-Challenging for leadership in tea around the world
Challenging
A state of mind throughout the organization, never being satisfied with the status quo, constantly
striving to be better and to do new things, in new ways. And a principle by which we manage our
brands in the market place, creating relevant differentiation and confidently projecting clear brand
identities.
Leadership
Not just in size, but more importantly in the eyes of our customers and consumers, through our
thoughts, ideas, behavior, and achievements. Through innovation, which will enable us to build
stronger relationships with our existing consumers, reach out to new consumers and keep the
category vibrant.
Tea
11
The product scope of our vision, encompassing the widest definition of the category, the production
and marketing of black and green teas, specialty fruit and herbal teas, ready-to-drink teas, tea
serving systems and retailing of tea.
The World
The geographic scope of our vision; building a global business by leveraging and building our
brands and forging partnerships to mutual advantage.
12
plantations towards the reconstruction agenda which , it is hoped, would augur well for the
employees. (See Note 6: Restructuring of NIPO). The Company is having a strong personnel
management department headed by VP-HRD assisted by dedicated personnel managers looking
after the personnel and staff welfare issue of each operating divisions of the company. As on 31st
March 2007 the company had 34506 employees, out of which 33226 were employed in the
Plantation divisions. Barring a 11-day lock-out at Borjan tea estate, the industrial relations during
2006-07 were generally peaceful. This indicates the strength of the Personnel Management.
Limit
Rate
of
Intere
st
Secur
ity
Fund Based
Nil
Non-Fund
Based
(excluding
DPG)
Term
credit
facilities
Rs. 2250.00 lacs
(including DPG)
4. Total indebtedness to our Bank (1+2+3):
a) Fund based
b) Non-fund based
TOTAL
Rs.2250.00 lacs
Nil
Rs.2250.00 lacs
: N.A
: N.A
: N.A
-Nil
VI. BRIEF HISTORY including current profile (See Note 9- History of the Company)
Tata Tea - Historical Milestones
Pre 1963
James Finlay
Tata Finlay established to develop value added Tea
1964
Tata Finlay takes over tea production and marketing operations of James Finlay
1976
1983
James Finlay sell their shareholdings to Tatas heralding the "Dawn of a new Era" - Tata Tea is
born
A wholly owned subsidiary, Tata Tea Inc, set up in the U.S.A.
1987
Acquisition of 52.5% shareholding in Consolidated Coffee Ltd (Tata Coffee Ltd.)
1991
Joint Venture in Sri Lanka, Estate Management Services (P) Ltd. formed.
1992
Joint Venture alliance with Allied Lyons plc - Tata Tetley established.
1993
65% share Lankan JVC acquires 51% shareholding in Watawala Plantations Ltd.
1995-96
Sri Lankan JVC acquires 51% shareholding in Watawala Plantations Ltd.
1996
Tata Tea acquires The Tetley Group Ltd., UK.
2000
Profile:
Set up in 1964 as a joint venture with UK-based James Finlay and Company to develop valueadded tea, the Tata Tea Group of Companies, which includes Tata Tea and the UK-based Tetley
Group, today represent the world's second largest global branded tea operation with product and
brand presence in 40 countries. Among India's first multinational companies, the operations of Tata
Tea and its subsidiaries focus on branded product offerings in tea but with a significant presence in
plantation activity in India and Sri Lanka.
16
The consolidated worldwide branded tea business of the Tata Tea Group contributes to around 86
per cent of its consolidated turnover with the remaining 14 per cent coming from Bulk Tea, Coffee,
and Investment Income. The Company is headquartered in Kolkata and owns 27 tea estates in the
states of Assam and West Bengal in eastern India, and Kerala in the south.
Products and Brands:
The company has five major brands in the Indian market - Tata Tea, Tetley, Kanan Devan,
Chakra Gold and Gemini -- catering to all major consumer segments for tea. The Tata Tea brand
leads market share in terms of value and volume in India and the Tata Tea brand is accorded "Super
Brand" recognition in the country. Tata Tea's distribution network in the country with 38 C&F
agents and 2500 stockists caters to over 1.7 million retail outlets (ORG Marg Retail Audit) in India.
The company has a 100% export-oriented unit (KOSHER & HACCP certified) manufacturing
Instant Tea in Munnar, Kerala, which is the largest such facility outside the United States. The unit's
product is made from a unique process, developed in-house, of extraction from tea leaves, giving it
a distinctive liquoring and taste profile. Instant Tea is used for light density 100% Teas, Iced Tea
Mixes and in the preparation of Ready-to- drink (RTD) beverages. With an area of approx 15,900
hectares under tea cultivation, Tata Tea produces around 30 million kg of Black Tea annually.
R&D:
Tata Tea and the Tetley Group have full-fledged R&D Centres that focus on the branded business.
In addition, Tata Tea has an R&D Centre at Teok (Assam) and a product development centre at
Bangalore focused on the entire gamut of tea operations.
Overseas Business:
The Tata Tea and Tetley portfolios of branded offerings caters specifically to the Australian,
Middle East, West Asia, North Africa, Poland, Russia and Kazakhstan markets. This is independent
of the manufacturing and supply operations of its Tetley and other subsidiary companies.
Subsidiaries & Associates:
Tata Tea has subsidiaries in Great Britain, United States and India. The Tetley Group has been a
member of the Tata Group since March 2000 and now contributes around two thirds of the total
turnover of Tata Tea Ltd. Headquartered in Great Britain, its footprint is global: Tetley has offices
in Australia, Canada, Poland, Russia, South Africa and the US, as well as joint ventures in Pakistan
and Bangladesh. Today, Tetley is the second largest tea bag brand in the world, and Tetley products
are on sale in over 40 countries. Tetley is the no.1 tea bag brand in Great Britain and Canada and
has significant market shares in the United States, Australia, Poland and France. Beyond these
markets Tetley is steadily growing its presence in Eastern Europe, Russia, through to Bangladesh
and Pakistan, and recently launched in South Africa.
Tetley has a customised portfolio of offerings for each country, ranging from Black, Green, Fruit &
Herbal Teas, Iced Ready-to-drink Teas and an extensive range of exotic Speciality Tea. Established
in 1837, Tetley was the first British tea company to introduce the tea bag to the UK in 1953, and the
company continues this tradition of innovation. The tea bag was followed by the first round tea bag
in 1989, and the 'no drip, no mess' Drawstring bag in 1997. A stream of successful packaging
formats include the resealable 'soft pack' format for Tetley teas in the UK, and a unique 'stay fresh'
round canister for green, fruit and herbal and speciality tea ranges in Canada, the UK and Australia.
A fully-owned manufacturing facility based at Eaglescliffe, in the North East of England.
17
Established since 1969, currently occuping 220,000 square feet and is the largest tea bag factory in
the world.
Tata Coffee with Instant Coffee manufacturing facilities, R&D capability and plantation assets of
around 8000 hectares, producing over 9000 MT of Coffee annually, is the largest coffee plantation
company in Asia. The company grows both the Robusta and Arabica varieties of coffee and markets
both instant and "ground" coffee. Its curing facility has the Certificate of Approval for Quality
Standards ISO 9002, the first curing unit in Asia to receive this certification. The Company's
operations also have the SA:8000 & UTZ KAPEH accreditation / certification with effect from
January 1st, 2006, the company has taken over 5 tea estates and one coffee estate of Tata Tea in the
Annamalai tea growing region of Tamil Nadu.
Tata Tea Inc. in the United States processes and markets Instant Tea from its facility in Florida,
based on sourcing of Instant Tea products out of Munnar, Kerala. Tata Tea has a substantial interest
in the Sri Lankan tea industry through Watawala Plantations Limited, Sri Lanka, where it focuses
on production and marketing of Tea, Rubber and Palm Oil. Kanan Devan Hills Plantation
Company Pvt. Ltd., established at the close of business on 31st March 2005, has major interests in
production and manufacture of black tea at its 17 estates in Kerala. Tata Tea has a minority stake in
the entity.
Welfare:
Tata Tea contributes significantly to social and community development on its estates through
comprehensive labour welfare programmes that offer free housing, healthcare and other benefits.
The company has set-up and manages hospitals, adult-literacy centres, childcare centres and
schools to educate the children of its nearly 34,000 employees. In addition, the company has special
facilities to look after "differently abled" children of the workers who are taught how to operate in
the environment by enhancing their skills and abilities. Tata Tea has institutionalised a process of
Annual Welfare Audit conducted by renowned WHO experts, among the first Indian companies to
do so. The Tetley business is managed in the spirit of trust and good corporate citizenship for which
Tata Group companies are justly renowned. The environment policy is focused on managing the
nature and quantity of waste created, and on the energy it uses in its facilities and in the movement
of goods and people. It was a significant achievement for the UK-based sites when they were
awarded ISO 14001 certification for environment management systems in March 2005.
Project DARE's- The Strawberry Project:
The Strawberry preserve making unit of DARE offers vocational rehabilitation to the elder children
of the project. As part of the rehabilitation programme, a strawberry preserve-making unit is
maintained by the centre where the children are not only involved in the collection, cleaning and
making of strawberry preserve but are also encouraged to grow strawberries, which are then bought
by the centre. This becomes an additional source of income for the children. The preserve consists
of farm fresh strawberries preserved in sugar and lime juice; no artificial preservatives or colouring
agents are used. During the first year, the centre made 900 bottles of preserve; this year, the number
has increased to 1.35 lakh bottles. The preserve, priced at Rs 67 per bottle, is available at all Taj and
Patisserie shops and Westside department stores. In Bangalore, the preserve can also be bought
from Nilgiris and Foodworld outlets. It is also locally available in Munnar. All proceeds from the
sale of the preserve go towards the rehabilitation of project DARE's industrious children.
Tata Coffee Limited
18
Tata Coffee Limited (TCL) is the largest Coffee Plantation Company in Asia with estates located in
Coorg, Hassan & Chickmagalur districts of Karnataka. The Company also grows Pepper and
Cardamom in its Coffee Estates. The Company's Timber resources include Rosewood, Silver Oak
and other miscellaneous trees. During the financial year 2000/2001 TCL acquired a contiguous
Coffee Estate in Coorg district of 534 Hectares namely "Coovercoolly estate". With this, the current
area under Coffee is around 8000 Hectares producing over 9000 Metric Tonnes of Coffee annually.
Both the Robusta and Arabica varieties of Coffee are grown in the estates.
The Company has a modern state of the art Curing Works at Kudige near Kushalnagar in the state
of Karnataka with a curing capacity of 22000 Metric Tonnes per annum. This unit has been
awarded the prestigious certificate of Approval for Quality Standards ISO9002 and is the first
Curing Industry in Asia to receive this certification. Effective 1st April'1998 a Company having a
capacity to produce 2000 Metric Tonnes of Instant Coffee (erstwhile Asian Coffee Limited) and
three Plantation Companies (including erstwhile Coffee Lands Ltd.,) were amalgamated into the
Company.
The Company's production capacity of 2000 Metric Tonnes per annum of Instant Coffee was
augmented to the extent of 2500 Metric Tonnes through Contract Manufacturing Operations. Tata
Coffee Ltd., commissioned an agglomeration unit at the Instant Coffee factory thereby creating
facilities for a diverse range of product offerings in the Instant Coffee business. Export of Instant
Coffee grew significantly. TCL also has five major Value Added Coffee brands "Coorg 100% Pure
Coffee" and "Coorg Double Roast" (Coffee Chicory mix) in R & G segment and "Tata Cafe" for the
North and "Tata Kapi" in the Southern Coffee segment Land Mr. Bean. Company also markets
branded Tea as "Coorg Tea". Effective 1st April '01 the entire Marketing operations related to R &
G brands have been transferred to its parent Company Tata Tea Ltd.
TCL has firmed up a number of initiatives to enable it to steadily move up the Coffee Value chain
thereby improving its margins.TCL is currently the exclusive supplier of Coffee Blends to Barista
for its entire range of offerings. This alliance would give TCL access to the Value Added Market
through Barista's expanding consumer base while Barista would get an access to TCL's Technical
and Blend experience on speciality coffee. TCL has initiated setting up of a Joint Venture Company
with its Russian partners for marketing its Instant Coffee in Russia. TCL is the first plantation
company selected by STAR BUCKS as suppliers in India.
are ten directors in the BOD which include the Chairman,Vice-Chairman, MD, Director-Finance,
marketing and executive directors.The Tata Tea GB looks after the Tata Tetley Inc.and its
subsidiaries, The TCL looks after its subsidiaries , The Tata Tea looks after ythe global operations
in terms of marketing and the EMSPL looks after the plantations and operations.
The Operating Divisions have GMs looking after various functions like Instant tea operations, tea
blending, business excellence, Tata Tetley divisions, besides CFO looking after the finance
aspects,CEO for special projects, R&D, DGMs looking after the NIPO and the SIPO, VP for HR,
chain management and a CIA who are further supported by respective VP/ AVP/Area managers.
Marketing arrangements:
The companys manufacturing divisions are divided into NIPO and SIPO headed by VPs and the
marketing is separated from it headed by GMs which is divided into sales general, marketing and
sales-south, sales and marketing-Dubai and looks after basically two types of marketing- customer
based prodoct differentiation under the instant /bulk tea .
Major developments if any that have taken place in the company:
New
1.
2.
3.
4.
5.
Refinancing in Tetley lowers finance costs by 2.5 mn per annum
6.
Brands
7. Fruit & herbals new launches in various geographies across the globe
8. Test marketing of iced teas in UK
9. Existing brands restaged in India
10. Launch of Kanan Devan Strong leads to a major jump in market share
11. Sania Mirza brand endorsement drives double digit growth of Tata Tea
12. Tata Gold captures 5% of market share within 26 months of launch
13. Increased market share in developing markets Success in opening up of new markets like
Bangladesh, Pakistan, South Africa, Russia and Kazakhstan.
Market Outlook India
-Indications of higher crop, lower exports leading to sub optimal prices
20
-Indian domestic consumption of tea grows at 1.5% pa irrespective of competition from other
beverages
-Whilst minimal there are indications of increasing trends in consumption of
-Tea bags
-Speciality Teas
21
-We may be No. 3 today in size globally, but, we must be No. 1 in the way we address the global
opportunity for growth and building customer relationships with sustainability
All grades of CTC Teas, All grades of Orthodox Teas, Organic Tea - Orthodox grades. Teas are
supplied in packaging as per ISO norms as well as customer requirements viz. 4-ply Kraft Paper
Sacks, Multiwall Paper Sacks, Rigid T--Sacks, Polywoven Sacks, Currugated Fibre Carlons,
Polylined Jute Bags etc.
Product-Instant Tea categories:
All products are cold water soluble. Instant Tea Division caters to customer specific product and are
used for light density 100% Teas, Iced Tea Mixes and in the preparation of Ready to Drink (RTD)
beverages. Instant Tea powder is packed in bulk packages of 20/25/35 kg each. The different types
of products are: Intant tea powder - heavy density, institutional density, grocery density, Micro
milled instant tea powder, for RTD, (Green Tea), (decaffeinated), Micro milled decaffeinated
instant tea. Acidified green instant tea, Instant tea pre mix for iced tea mixes, Carbo instant tea
Decaffeinated, Institutional density, Heavy density, Pre acidified, 100% instant tea in 3 oz. Jars,
Nutrasweet instant tea mix in 3 oz. Jars, Nutrasweet decaff. instant tea in 3 oz. Jars, In addition,
customer specific products can be developed and supplied.
22
beverages with multiple additive natural taste enhancers now finds increasing acceptance across
youth and mature consumers. Concurrent to such development is the slow and steady dissemination
of evidence of the well-being and antioxidant properties of black tea. While it has not yet led to any
significant shift of consumption pattern in Western markets, there is now increasing comfort in
black tea consumption amongst youth in Asia and selected global markets.
The growth rate of ambient black tea consumption led by India and ambient green tea consumption
led by China has still not capitalized on the significant out-of-home beverage potential in these
countries. Even in Western markets hot tea vending is yet to achieve the convenience and variety of
options offered by competing beverages. Lifestyles changes increasingly lead to greater quantum of
consumer pattern spend in out-of-home consumption. Black and Green tea catering to such demand
will drive consumption patterns in a significant manner. The entire role play for tea in this
consumption pattern shift assumes significant potential and commercial opportunity.
The convergence of youth consumer driven trends and patterns of beverage and nutrient intake for
well being opens up space for tea, coffee, water based products and services to reconstruct their
business ambition and remain relevant to emerging consumer requirements and emanating
customer servicing formats and channels. These macro trends emanate from key Western markets
and increasing evidence of a similar global pattern behavior is now visible. The pace of such
innovation driven change drives the consumer food and beverage intake pattern behavior,
accelerating the pace of decline in existing formats of product and service offerings.
other Tetley markets. It is through growth in development of a significant business in this sector of
the tea market that stave the threat of declining black tea consumption based product offerings in
Western markets. The pace of such effort needs momentum and investment to fuel growth ahead of
the impact of the black tea sector decline in these markets. Concurrently, the company has gained
significant start up learning in the beverage arena through acquisitions and organic product
launches of RTD formats in select global markets.
The ability to enhance market share and be the global No. 2 player in tea, provides them
competitive edge to face the threat of declining gross margins even as the sector stagnates or
declines in western markets. The company continued to increase market share in major markets.It
retained market leadership in GB and Canada. In India Tata tea was ranked 10th in the superbrand
rankings by The Economic Times, a significant improvement and ahead of its largest competitior.
The company energize innovation and enhance the pace of new consumer offerings to overcome
the lack of growth of the ambient black tea category in certain markets. Its speed growth utilizing
acquisitions to do so to supplement the efforts of organic brand development.
It has inculcated increased focus on business excellence and process driven activity to optimize
resource utilization for the business. Commitment to the Tata Business Excellence Model and track
of its journey on it, tables prioritized opportunities for improvement for address and improves our
ability to compete and utilize resources. It is increasingly adopting and adapting learning from its
partners across the globe from within the businesses and benchmark practices that enhance levels of
performance. This enables them to change mindsets, lead innovation and growth and overcome the
threat of managerial inertia and obsolescence. The exposure to commodity through a vertical
integrated Supply Chain was an inherent threat in the business a few years ago. The company is
now steadily moving to a stage where it can globally compete for Supply Chain capacity and
capability to drive better value for its business.
The Companys Internal Audit Department is responsible for periodically carrying out audit of the
transactions of the Company at the tea estates, branches and offices in order to ensure that
recording and reporting are adequate and proper. The Internal Audit Department also verifies
whether internal controls and checks & balances in the system are adequate, proper and up to date.
They also periodically verify safeguarding of Companys assets and ensure that there is no
unauthorized use. The Company has also engaged Management Auditors to independently examine
specific areas of operation and suggest methods to improve efficiencies and controls.
The Audit Committee of the Board reviews all important Internal Audit and Management audit
reports and suggests corrective actions for the management to implement. The company also has a
25
system of periodic review of risks and control systems. It has developed a risk register, which forms
the basis for review. The Internal Audit team also assesses the risks facing the company, steps taken
to mitigate the risks and holds discussions with management on the subject in order to create
awareness of the risks and to take appropriate actions for reducing the impact and frequency of
occurrence of the risks. Companys internal control system and its effectiveness are also verified
periodically by the Statutory Auditors and reported to the Audit Committee of the Board.
Corrective actions for any weaknesses in the system that may be disclosed by such audits are taken.
FINANCIAL & OPERATING PERFORMANCE
The Company recorded commendable growth in performance during the financial year. Total
Income at Rs 1146 crores increased by 10% despite exit from a part of South India plantation
operations. The growth was driven by strong performance of the companys branded tea portfolio.
Profit before tax, exceptional and nonrecurring items at Rs 243 crores grew by 18%. After
exceptional items, which principally related to profit on sale of investments , the profit after tax at
Rs 307 crores grew by 64%. The strong performance of the branded tea portfolio was higher than
market growth with increased market share. Plantations performance was better relative to previous
year due to restructuring of South India operations and improved operating performance in North
India. This excellent performance reflects volume and value growth and effective cost management.
The Earnings per share improved from Rs 33.25 to Rs 53.56, an increase of 61%.
CONSOLIDATED FINANCIAL PERFORMANCE
The companys consolidated turnover at Rs 4103 crores increased by 30% compared to the
comparable period in the previous year. Profit before taxes and exceptional items at Rs 456 crores
has however increased by only 11%, principally in view of the impact of interest on loans taken for
acquisitions . Profit after tax at Rs 443 crores was higher by 48%. Consolidated Basic Earnings per
share was significantly higher at Rs 77.46, an increase of 46%. As per Indian GAAP, the
Companys 77.78% foreign subsidiary, TTGB Ltd, registered a turnover of Rs 2298 crores, which
was higher than the previous year turnover by 13%. Profit before tax, interest on loans taken for
acquisitions and exceptional items at Rs 253 crores was higher by 25%.
The following table summarises segment wise turnover of the Tata tea group. With the acquisition
of Eight O Clock Coffee company through Tata Coffee Ltd and commencement of production of
instant and freezed dried coffee by Tata Coffee Ltd, the coffee business will be a more significant
part of the the overall consolidated performance.
26
Strategic plan:
Refer: Quality of Management- company strategicfocus, Note- 3a, 3b, 5 & 6.
Points to consider
After restructuring operations and debt, Tetley is in a sound financial position and will now focus
on growing the business at an accelerated pace. With the UK subsidiary accounting for over 70 per
cent of the consolidated earnings of Tata Tea the Indian tea major should do well going forward.
Tata Tea, along with its subsidiary companies, has a significant presence in over 45 countries. The
Group's global branded business amounts to just under US$ 1040 million. The combined sales of
Tata Tea and its subsidiary The Tetley Group would in aggregate represent the second-largest
branded tea portfolio in the world. Tata Tea's operations span the entire value-chain in tea,
including research and development, tea cultivation, manufacture of black and distribution. The
company has 6 major brands in the Indian market - Tata Tea, Tetley, Agni, Kanan Devan, Chakra
27
Gold and Gemini, spanning every price point from Premium to Economy. The Brand Tata Tea is
today the largest in the country in terms of value market-share. To a large extent the market will be
on the outlook for Tetley, which in turn will decide sentiment in the Tata Tea.
As far as Tetley is concerned the company after restructuring operations and debt, is in a sound
financial position to focus on growing the business at an accelerated pace. It plans to achieve
organic annual sales growth of 10 per cent. To do this the company plans to expand its footprint to
cover wider geographies. The company has also entered the US Ready-to-Drink (RTD) tea
segment. Further, it is contemplating acquiring a niche player where Tetleys competencies can be
leveraged. Given the strong backing of the Tata group, Tetley is unlikely to face financial
constraints in developing new opportunities.
In the domestic market, Tata Teas volume growth is likely to continue having withstood
competitive pressures from regional brands and the relaunched Brooke Bond. The increased
consumption of tea in domestic markets and improved outlook for exports augur well for auction
prices.
Tata Teas fortunes do not completely depend on tea auction prices. The company will log a steady
performance even as tea auction prices hit lows. Despite lower prices the branded business will
register healthy growth and protect the bottomline. Tetleys profits and free cash flows are also
likely to register strong improvement. Considering Tetleys strong brand equity being the worlds
second largest tea brand, high free cash flow generation and rapid drop in gearing, valuations for
Tata Tea appear attractive.
(See notes at the bottom of all the Forms-II, III, IV, V, VI)
Gist of the same is as follows:
Companys financial position as per balance sheet
(Rs in crores)
Key Financial Ratios
Per Share
EPS
CEPS
Book Value
Dividend/Share
2007/03
2006/03
2005/03
2004/03
2003/03
51.93
33.25
22.93
16.28
12.56
55.08
36.71
26.84
20.20
16.59
257.81
202.67
182.70
169.58
170.18
15.00
12.00
10.00
8.50
7.00
28
Performance/Financial
(Rs. in Crores)
31.38
29.56
23.61
15.47
13.05
178.89
172.67
157.88
137.23
131.81
238.24
181.11
160.98
154.01
147.32
17.54
17.12
14.95
11.27
9.90
15.78
15.11
12.47
8.41
6.84
26.80
17.90
13.50
10.88
8.72
10.97
14.36
13.15
9.18
6.71
0.52
0.21
0.18
0.20
0.23
1.12
1.04
1.12
1.09
1.31
0.57
0.55
0.53
0.62
0.83
5.80
13.63
14.23
8.61
5.06
23.52
82.20
23.81
34.09
8.86
4.70
4.25
3.16
2.65
2.38
2.60
3.10
2.63
2.70
2.12
15.31
4.38
15.12
10.56
40.64
0.00
0.00
0.00
0.00
0.00
Indicators
(As
per
Form
2007
80.86
1565.56
243.97
566.42
504.12
62.30
306.56
325.10
1.12
0.73
2008
80.86
1715.39
266.28
831.78
621.28
210.50
348.36
376.05
1.34
0.69
2009
80.86
2057.42
322.78
923.14
688.83
234.31
450.55
482.43
1.34
0.56
1054.47
224.82
1148.75
297.03
1251.85
369.15
Ratios
Year Ending March 31,
Share Capital
Tangible Net Worth
Net Block
Current Assets
Current Liabilities
Net Working Capital
Net Profit/Loss
Cash Profit/Loss
Current Ratio
Total Outside Liability/Tangible Net Worth
Net Sales
Other Income
29
III)
183.76
140.17
19.43
159.60
250.31
141.84
14.48%
76.93
41.86%
349.76
306.56
18.54
325.10
243.97
635.99
29.07%
108.52
31.03%
397.45
348.36
27.69
376.05
266.28
562.49
30.33%
108.52
27.31%
514.03
450.55
31.88
482.43
322.78
453.69
35.99%
108.52
21.11%
:
Qty:
Value:
:
2007
Rs 1054.56 Crores
Qty:
Value:
: Rs 968.34 Crores
2006
30
: Rs 163.25 crores
: Rs 143.09 crores
: Improved by 14%.
On
financial position
Individual Forms)
(See
notes
under
a)
b)
c)
d)
e)
f)
Remarks
on
investments/advances
associate concerns
g)
h)
i)
j)
k)
to
31
practice
The actual production/sales for the last 2 years and estimation/projection for
the ensuing/next year.
Year
Sales ( Rs Crores)
Quantity
Values
2005-06
2006-07
2007-08
2008-09
968.20
1054.47
1148.75
1251.85
Present actual monthly sales during current year (upto date of submission of
proposal)
2007-08
Ist Quarter Sales (June 07)
2nd Quarter Sales (Sept 07)
Rs. in Crores
290.01
319.05
Comments
on
the
levels of current assets
projected:
a) Raw material
The raw material mainly consists plucked tea
leaves.
b) Stores & Spares:
Stores and spares are in the form of spares
required for the heavy machinery used in the
operations/processing of tea leaves.
Comments on current
liabilities
a) Creditors for purchase
33
b)Advances
customers
Usance
Total
34
Collateral
Proposed
Description
Value
(
Rs
crores )
First Charge on 89.50
First Charge on Current
Current Assets of crores
Assets of the company
the
company
ranking pari passu with
ranking pari passu
the
other
working
with
the
other
capital bankers.
working
capital
bankers
Not Applicable
Not Applicable
Margin:
The margin for the existing limits and proposed
For Existing Limits
Facility
Margin
Receivable
SOD
25%
35
Value
(
Rs
crores )
102.92
Rate
Interest
SOD
Recommended
limits
of Facility
for
proposed
Rate
of
Interest
SOD Rs 13.42 0.5%
above
Crores
PLR subject to
a minimum of
13.50 % p.a.
payable
at
monthly rates.
a) Fund
Based
Facility
SOD
Tot
al
b) Non Fund None
based
Tot
al
Existing
TL-Rs.22.50
crores
NIL
Proposed
13.42 Crores
35.92 Crores
NIL
XII. SHARING OF FUND BASED AND NON FUND BASED CREDIT LIMIT IN
CASE OF CONSORTIUM. The proposed fund based limit is within the
MPBF of the company.
XIII. OTHER LIABILITIES OF THE COMPANY/DIRECTORS/PARTNERS TO THE
BANK: Nil
XIV: PARTICULARS OF ASSOCIATE/GROUP CONCERNS DEALING WITH
OUR BANK: Nil
XV: PARTICULARS OF ASSOCIATE/GROUP CONERNS DELAING WITH OTHER
BANKS: N.A.
36
XXI. RECOMMENDATION
37
Asst/Sub Manager
Sr Br. Manager
38
ANNEXURE I
Based on the information available in the annual report
1.
2
I
A
1)
2)
3)
4)
5)
6)
B
1)
2)
3)
4)
C
Term
Credit Rs. 2250.00 lacs as per annual report 2006-2007
Facilities
Total
Indebted Rs.2250.00 lacs
ness to our Bank
( A+B+C)
II
With
other TL- Rs. 4500.00 with HDFC; Bridge Loan-Rs.55000.00(Bank N/A
Bank/Institutions WC Finance- Rs. 8949.77 lacs from HDFC
3.a) Asset
N/A
Classification
b)
Amount
of N/A
Provision/Interest
Reversal
Review of Operations :
NIL
1.
Comments on utilisation of
ODH Limit:
2
Comments
on
bills
discounted:
Whether the Bills are paid on
time
No of Bills returned during the
above period and amount
Details of Present overdue
bills(
such
as
date
of
discount, amount, drawee
name, due date)
Steps taken for Regularisation
N/A
39
3
4
6
7
9
10
11
12
Letter of Credit
N/A
Guarantees ( last 12 month N/A
period ended)
No of Guarantees Issued
Total Value of Guarantee
Commission Earned
Particulars of Invocation of
Guarantee
Particulars
of
Guarantee
outstanding beyond validity
period
Steps taken for cancellation of
the guarantee
Value of Account ( For 12 Term loan of ICICI had not been utilized
Due to insufficient time.
Months Period Ended)
Interest Earned
Discount Earned
Exchange Earned
Commission Earned
Funds not utilised per annual report 06-07
Term Loans/DPG
N/A
Foreign Exchange Business
Export-Rs.16150 lacs
Total
Foreign
Business Import
Rs. 3034 lacs
Acquisitionhandled by the Co for
Rs.55000 lacs
the year ended 31.3.07
N/A
Business Routed through the N/A
bank during the said
period
Whether Companys entire exports are Directly / through subsidiaries
effected directly or any part thereof is
routed through another agency
Comments
No information
Other Ancillary Business
No
Amount
Commn Earned
Bill Sent on Collection
MTs/TTs/DDs purchased
IBCs received
Others
Deposits
Dividend
/Interest
Payment
/Warrants handled/income
Others(
Merchant
Banking
Business Income etc)
General
Are documents in order and in Creation of charge is pending for the term loan
force?
Whether joint documentation is N/A
done ( in case of consortium
advance )
40
Note:
Annexure to the Auditors Report- (Referred to in paragraph 3 of the Auditors Report of even date to the
members of Tata Tea Limited on the financial statements for the year ended 31st March, 2007)
Point 16. In our opinion, and according to the information and explanations given to us, on an overall basis, the
term loans have been applied for the purpose for which they were obtained except for one term loan of Rs. 2250
lakhs drawn from a bank towards end of the year. According to the explanations given by the management it
was not possible to apply the loan immediately for the purpose for which it was taken.
41
ANNEXURE II
Particulars of operations in ODH account :
1. Not applicable since application for 1st loan from bank.
2. There is no negative comments on the existing WC loan from other bank by the auditors.
3. (Assumed)- Confidential report and opininon report from other banks have no negatiuve
comments on the company as well as the promoters and the directors from other banks in
terms of debit/credit summations, outstandings and net worth of the directors/promoters.
Note: Annexure to the Auditors Report-(Referred to in paragraph 3 of the Auditors Report of even date to
the members of Tata Tea Limited on the financial statements for the year ended 31st March, 2007)
10. The company has no accumulated losses as at 31st March,2007 and it has not incurred any cash
losses in the financial year ended on that date or in the immediately preceding financial year.
11. According to the records of the company examined by us and the information and explanation
given to us, the company has not defaulted in repayment of dues to any financial institution or bank
or debenture holders as at the balance sheet date.
12. The company has not granted any loans and advances on the basis of security by way of pledge
of shares, debentures and other securities.
13. The provisions of any special statute applicable to chit fund/nidhi / mutual benefit
fund/societies are not applicable to the company.
14. In our opinion, the company is not a dealer or trader in shares, securities, debentures and other
investments.
15. In our opinion and according to the information and explanations given to us, the terms and
conditions of the guarantee given by the company in a previous year and released during the year,
for a loan taken by a party from bank, are not prejudicial to the interest of the company.
16. In our opinion, and according to the information and explanations given to us, on an overall
basis, the term loans have been applied for the purpose for which they were obtained except for one
term loan of Rs. 2250 lakhs drawn from a bank towards end of the year. According to the
explanations given by the management it was not possible to apply the loan immediately for the
purpose for which it was taken.
17. On the basis of an overall examination of the balance sheet of the company, in our opinion and
according to the information and explanations given to us, there are no funds raised on a short-term
basis, which have been used for long-term investment. For this purpose bridge loans from banks for
acquisitions have not been considered as the same are being replaced by long term finance.
42
ANNEXURE V
ASSESSMENT OF TERM LOAN/DPG REQUIREMENTS
Not applicable (assumed done separately).
Not Applicable since it is assumed that the increase in the Term loan by 10% is already
sanctioned. Further, the company already has a sanctioned limit of Rs.2250.00 lacs with
ICICI bank, information with respect to it is provided at Note 8.
REMARKS ON BALALNCE SHEET AND WORKING RESULTS
OPERATING RESULTS:
1. Segment: Sales figure for the last three years is as follows for the
three segments of the company as consolidated:
Segments
Tea Segment
Coffee Segment
Others segments
2004-05
Rs.
2849.50
Crores
Rs.
186.4
Crores
Rs. 20.7 crores
2005-06
Rs. 2944.01
Crores
Rs.
162.22
Crores
Rs.18.33
crores
2006-07
Rs. 3332.19
Crores
Rs.692.26
Crores
Rs.
18.79
crores
2. Sales: The sales for the company have been registering a consistent
increase over a period of last three years and the same is expected to
continue.
2004-05
Rs 896.32 Crores
2005-06
Rs. 968.20 Crores
2006-07
Rs. 1054.47 Crores
Operative Profit: The PAT for the company has been increasing
consistently over the years.
2003-04
Rs. 128.93 Crores
2005-06
Rs. 186.93 Crores
43
2006-07
Rs. 306.56 Crores
2007/09
Year ended
2006/09
var %
2007/03
2006/03
Rs. cr
var %
Sales Income
319.05
274.00
16.44
1,070.35
982.05
8.99
Other Income
18.40
48.78
-62.28
75.76
57.96
30.71
243.38
202.65
20.10
872.67
806.26
8.24
2.49
3.85
-35.32
11.63
8.97
29.65
91.58
116.28
-21.24
261.81
224.78
16.47
5.31
4.79
10.86
18.54
19.43
-4.58
Tax
19.51
15.57
25.31
43.20
43.59
-0.89
PAT
64.81
163.92
-60.46
306.57
186.93
64.00
Equity
61.84
56.22
10.00
59.03
56.22
5.00
OPM (%)
23.72
26.04
-2.32
18.47
17.90
0.57
GPM (%)
22.94
24.64
-1.70
17.38
16.99
0.39
NPM (%)
20.31
59.82
-39.51
28.64
19.03
9.61
Expenditure
Interest
Gross Profit
Depreciation
3. Depreciation: The depreciation has been charged as per Indian Company Act 1956.
FINANCIAL POSITION:
1. The Net Worth of the company has increased by Rs 404.3 Crores owning to ploughing back
of net profit, fresh capital and share premium.
2. The current ratio of the company as on 31.03.2007 was 1.12 as against 1.27 as on
31.03.2006 considering the bridge loan as longterm liability sinceitspurposeisforlong term
and that it was issued against a long term loan that isit being replaced by long term
financing. (per Auditors report-point17), (See Note-12, point-21). Further, this makes the
financial more conservative because the CR has now improved and slipping back in future
will effect its market cap as well as the breaking of standard covenants of WC finances.
44
3. The total outside liabilities to tangible net worth has increased from 0.46 to 0.73 which is
still below 1.00 and hence can be termed as very impressive. The increase is mainly due to
the bridge loan of Rs. 55000.00 lacs for acquiring the EIB.
4. Receivables other than export and deferred receivables expressed in Months domestic sale
is at 0.71 and including exports is 0.87, an increase of 5 days, which is reasonable whereas
only exports is also 0.87 which is very reasonable.
5. The level of raw material expressed in Months consumption as on 31.03.2007 is at 2.59
inclusive of imports and 2.55 exclusive of imports which is reasonable considering the fact
that the plucking follow a cycling/seasonal trend. Hence, inventory building will be a normal
trend in this industry.
6. The level of finished goods expressed in Months cost of sales as on 31.03.2007 is at 1.53
which is reasonable considering the fact that the plucking follow a cycling/seasonal trend.
Hence, inventory building will be a normal trend in this industry.
7. The level of Stock in Process expressed in Months cost of production as on 31.03.2007 is at
Nil position which is in tune with the processing time being low.
8. The level of Creditors for purchase of raw materials expressed in Months purchase as on
31.03.2007 is at 4.45.
9. The investment in the subsidiaries, group companies & integrated joint ventures as on
31.03.2007 is Rs 1788.77 Crores.
10. The company is investing in subsidiaries through global expansion in order to increase the
Net worth, its global sales account for 75% of the total sales & as per Annual report
company plans to continue with this , at the same time it is slowly restructuring its Indian
operations particularly in the plantation sector..
11. The Key financial ratios for the last five years are as follows:
Key Financial Ratios
EPS
CEPS
Book Value
Dividend/Share
OPM
RONW
Debt/Equity
Ratio
Interest Cover
2007/03
2006/03
2005/03
2004/03
2003/03
51.93
33.25
22.93
16.28
12.56
55.08
36.71
26.84
20.20
16.59
257.81
202.67
182.70
169.58
170.18
15.00
12.00
10.00
8.50
7.00
17.54
17.12
14.95
11.27
9.90
10.97
14.36
13.15
9.18
6.71
0.73
0.46
0.18
0.20
0.23
1.12
1.27
1.12
1.09
1.31
5.80
13.63
14.23
8.61
5.06
45
12. The shares of the company are traded in Stock Exchanges and the movement of the
share price during the last 24 months was as follows:
46
On Revaluation of Fixed Assets: No revaluation has been carried out during the
current year.
ii)
iii)
On loans and Advances given to concerns within the group: The Company has not
granted any loans, secured or unsecured, to companies, firms and other parties
covered in the register maintained under section 301 of the Companies Act, 1956
during the year. Accordingly, paragraphs 4(iii)(b), (c) and (d) of the Order are not
applicable.
iv)
The Company has not taken any loans, secured or unsecured, from companies, firms
and other parties covered in the register maintained under section 301 of the
Companies Act, 1956. Accordingly, paragraphs 4(iii) (f) and (g) of the Order are not
applicable
v)
vi)
vii)
On disputed liabilities not provided for: No such liabilities as per our knowledge
based on companys declaration.
viii)
ix)
47
x)
There are no funds raised on a short-term basis, which have been used for long-term
investment. For this purpose bridge loans from banks for acquisitions have not been
considered as the same are being replaced by long term finance.
The Overall Financial Position and working results based on the above analysis is satisfactory
Manager
Chief Manager
Date:
Name of theBranch/Place:
48