CALCUTTA, Jan 30: The Tata Tea is reviewing its financial portfolio to meet the long-term capital expenditure required for its ongoing projects. During the current fiscal, the tea major has converted loans worth Rs 21 crore into a foreign line of credit, placed non-convertible debentures and floated a fixed deposit scheme.Top officials of the company told The Financial Express that most of the debt taken by the company was to meet the capital expenditure incurred on modernising its factories and exploring prospective ventures in Africa and Sri Lanka.
Tata Tea has recently placed non-convertible debentures worth Rs 50 crore with a 13 per cent interest rate without any put or call option. The NCDs have been lead managed by Kotak Mahindra.
``This would be utilised as part loans as it would also cater to working capital requirements of the company," an official said.
According to a rough estimate, short-term loan requirement is about Rs 150 crore. Tata Tea also went in for a Rs 20-crore commercialpaper recently, the official said.
As part of its financial review programme, Tata Tea has also converted a Rs 21-crore HDFC loan into foreign debt worth $5 million repayable over a seven-year period.
``The present rupee devaluation would not have a major impact on the company as its tea exports provide a natural hedge.
Tata Tea's policy is not to take any cover for long term loans. The cost of finance works out to be less with a saving of almost 10 per cent compared to domestic borrowing," he added.
Since 1995-96, the company has embarked on a Rs 160-crore asset upgradation programme. For this, it has already secured a loan equivalent to $19 million from the Industrial Credit & Investment Corporation of India. This fiscal, it secured a syndicated loan of $15 million for the second phase of development.
The company will use a large part of these funds for installing higher efficiency machines and enhancing capacities at its factories in both north and south India.
Tata Tea's recent Rs 60-crorepublic deposit scheme has both non-cumulative and cumulative fixed deposits for two and three years.
The schemes carry 12.5 and 13.5 per cent interest rates at the end of two and three years respectively.
The company is eyeing business prospects in African markets. It is also close to finalising deals in Tanzania mainly through the acquisition route.
According to the official, the company has become a favourite of the stock markets due to its strong fundamentals. Tea exports are set to increase this fiscal with instant tea and its packet variety making rapid strides in the wake of a buoyant market. Tata Tea has decided to route its exports through Tata Exports to maintain a group focus.
Renewal of contracts with US majors Tetleys and Snapple for marketing Tata Tea's instant tea powder in the global market has helped the company boost exports on a consistent basis which helps it earn profits in hard currency areas.
``On the domestic front, increased sales have been possible through improvedefficiencies and a strategic mix of proper pricing policies and distribution network," the official added.
Tata Tea has a 25 per cent market share but its major strategy is to focus on regional markets in a big way. Its flagship brand `Tata Tea' has a considerable market share across the north Indian heartland, whereas other brands like Kanan Devan, Chakra and Gemini have more than 65 to 70 per cent share in the regional pockets of Andhra Pradesh and Tamil Nadu.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
