CALCUTTA, July 19: Hindustan Lever Ltd, the soaps and personal products giant, is considering a proposal to buy UK-based Jokai Tea Holdings Plc, which has the majority stake in YK Modi's Rossell Industries Ltd. The acquisition of Jokai would give HLL control over Rossell Industries, which has eight tea gardens, all in Upper Assam. HLL's Doomdooma gardens are also in Upper Assam.

The deal is expected to be struck at a price of around Rs 140 crore.

According to sources, the move to sell Jokai is part of a restructuring being planned for Rossell Industries and its three subsidiaries - Modi Korea Telecommunications Ltd, Rossell Financial Services Ltd and Bokel Investments Ltd. Rossell, which recorded a loss of Rs 1.17 crore during the 18-month period ending on September 30, 1996, is saddled with huge loans and advances to the tune of Rs 18.82 crore to its subsidiaries.

Corporate analysts said Rossell Industries is delinking two subsidiaries and selling RFL mainly because HLL is interested in the tea operations only.

When contacted over the telephone, Irfan Khan, HLL's chief of corporate communications, declined to comment on the proposal and said, "We do not make a statement before any merger or acquisition". The Rossell Industries management was also tightlipped on the issue. Sources close to Modi said there was no question of his selling Jokai Tea Holdings Plc as "he does not own the company".

Deepak Atal, managing director of Rossell Industries, said he does not have any knowledge about the move to sell Jokai. He categorically stated that there was no proposal to sell Rossell Industries to HLL or for that matter to anybody.

It is learnt that Jokai Tea Holdings plc holds over 36 per cent in Rossell Industries. However, analysts feel that the stake of Jokai in Rossell Industries, both directly and indirectly, could be as high as 61 per cent.

Thus, a buyer would have to pay around $24.4 million for the 61 per cent overseas stake, in the total purchase price of around Rs 140 crore.

Rossell's eight gardens reported a 16.46 per cent increase in production during January to March this year over that in the corresponding period last year. According to the figures available with the Indian Tea Association, the performance of Rossell Industries is better than most tea companies in Assam and second only to that of Doomdooma.

HLL's installed capacity of packet tea is 37 million kg. In 1996, it earned Rs 1,141.96 crore on sales of 113.95 million kg of packet tea. In 1995, before sister concern Brooke Bond Lipton India Ltd (BBLIL) merged with it, Lever's income from packet tea sales was Rs 1.32 crore on a volume of 1,94,000 kg. BBLIL is the largest buyer in the tea industry, picking up nearly 146 million kg a year from auctions.

Rossell's income from tea sales in its last accounting period was Rs 69.99 crore. Exports are expected to double in the current 15-month accounting period ending on December 31.

According to Atal, Rossell expects a production of around 11 million kg, inclusive of purchases from small growers, during the current financial period from October 1, 1996, to December 31, 1997. During the first six months of the current year, production was 1.36 million kg against 1.17 million kg in the corresponding period of the last financial year. The first half includes only two producing months. In the next nine months, the company is aiming for a production of around 10 million kg including purchases from outside.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.