While addressing shareholders at the company's annual general meeting here on Friday, chairman Ratan Tata said that the whole purpose of creating an SPV was to protect Tata Tea from any eventual downturn following the acquisition. ``We would not like to endanger the dividend paying capacity of Tata Tea at a later period,'' he said.

Tata Tea vice-chairman RK Krishnakumar said that the entire structure of the deal would be worked out once the due diligence exercise was completed in the next eight to 10 weeks. The due diligence for the deal is being handled by Rabo Bank, a leading bank in handling agro-based industries, a UK audit firm andNM Raiji, an Indian audit company.

``We would be able to arrive at a proper price only following the due diligence which would take into account a whole gamut of factors regarding the strategies and logistics of the entire deal. Right now a price of £290 is too high and we would further negotiate on the issue,'' he said.

Loans from financial institutions and the contribution of Tata Tea would automatically come down once a smaller acquisition price was arrived at, said Krishnakumar.

According to Ratan Tata, the whole idea of acquiring a brand was conceived earlier and the company's strategy was to establish a global presence in a big way. ``By buying a global label, the distribution system of the Indian company would receive a huge fillip. Access to global markets would be easier and this would provide us an outlet for our own teas substantially,'' Tata said.

Tata Tea obtained an enabling resolution at the AGM to raise a sum not exceeding $100 million or its equivalent in other currencies through theissue of securities in the international or domestic market. It also sought the shareholders' approval for making an investment of £75 million or its US dollar equivalent in the equity shares of the new company to be floated in Europe or elsewhere.

Tata Tea's current joint venture with Tetley would cease to operate and in all probability be merged with the larger group if the acquisition went through, said Krishnakumar.

Tata Tea's intentions would be to exploit the vast world market for instant and flavoured teas apart from tea bags and packets for which the UK-based Tetley is well-known.

Tata Tea would also be looking at other acquisitions in the foods segment in the next two years. ``This would begin once the Tetley deal is struck. At the moment, we are holding back our plans for investments in gardens in Sri Lanka and other African countries,'' said Krishnakumar.

On the production front, Tata Tea's crop loss has been in the order of 18 million kg in the first few months of this fiscal. Totalproduction during 1998-99 was at 60.7 mkg, which was marginally lower than that in 1997-98.

However, the company's packet tea sales registered a healthy overall growth of about 13 per cent. Its two new brands, Agni and Lucky Cup, performed to full capacity.