Tatas May Spin Off Water Business
Prasad Sangameshwaran
February 12, 2007

Mumbai: The Tata group is looking to spin off its bottled water business into a separate company.

The group's bottled water business currently includes a 30 per cent stake in US' third largest bottled water company Energy Brands Inc.

The group is also believed to be in talks to acquire Dadi Balsara's Himalayan water brand. A top team headed by R K Krishna Kumar is working out the details of the acquisition, say sources.

Energy Brands is an associate company of the group in which Tata Tea holds a 25 per cent stake, while the remaining 5 per cent is held by a subsidiary of the group's holding company, Tata Sons. The Tata group had acquired this stake for roughly Rs 3,100 crore (Rs 31 billion) last August.

As the group scouts for more acquisitions in the bottled water business, the subsidiary of Tata Sons that holds the Glaceau stake is expected to play a greater role. A Tata group spokesperson said the group did not want to comment on the matter.

A section of analysts said the spin-off could help the group minimise the impact of the Glaceau acquisition on the balance sheet of Tata Tea, more so as the group had the right to increase its stake in Glaceau to 40 per cent.

In the last quarter ended December 31, the interest on the Rs 763.39 crore (Rs 7.63 billion) loan taken to part-finance the acquisition was Rs 12.41 crore (Rs 124 million).

Tata Tea, which has executed the acquisition through its UK-subsidiary Tata Tea GB, has been selling its investments in group companies and restructuring its plantation business to repay the loan.

A Mumbai-based analyst said that if the group could have two retail companies, Trent and Infiniti, to manage its retail operations, the same logic could apply to beverages.

Trent, a publicly listed company, manages the Westside chain of departmental stores, apart from the foray into supermarkets, while Infiniti launched the group's diversification into durables retail through the Croma chain of stores.

However, a consumer goods analyst said that the flavoured water business acted as a hedge against the decline in black tea consumption in developed markets.

"The ideal combination is to develop a complete spread of offerings, from tea and coffee to water, under a single company, to cover the entire spectrum of beverage consumption," he said.

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