India’s Tata Tea may uproot itself from Sri Lanka

October 3, 2006 (LBO) – Indian tea giant Tata Tea is in talks with a Sri Lankan firm to sell off its plantation venture here, officials said. Tata has invested in Sri Lanka through a controlling stake in Sunshine Holdings Ltd, which in turn owns 51 percent in Estate Management Services (Pvt) Ltd, who controls 58.75 percent of Watawala Plantations.

Tightly held Sunshine Holdings’ top five shareholders control 93 percent of company.

Watawala’s controlling shareholders have signed an agreement with a Sri Lankan buyer on Monday, to dispose all shares once both sides are satisfied with the outcome of a due diligence study.

“There is no time frame as to when the due diligence study will be finished. But Tata has announced plans sometime back to gradually get out of plantation management,” Sunshine Holdings Director, Vish Govindasamy said Tuesday.

Though the party was not disclosed, market players were speculating that Richard Peiris and Finlays were interested.

However, a spokesman for Richard Pieris played down the possibility.

Last year, Tata sold out of its Indian plantations by transferred tea estates in South India to an employee-owned private company.

Tata’s Sri Lankan joint venture, Watawala Plantations, is one of the few local companies to get into the retail market in a big way, selling Ceylon tea under the ‘Zesta’ and ‘Watawala’ brands.

Watawala currently manages 12,442 hectares of estate land growing tea (41 percent), rubber (18 percent) and palm oil (8-percent). About 7-percent is set aside for fuel wood purposes and the remaining is uncultivated.

Sri Lanka produces around 300 million kilos of tea each year, of which around 10 million kilos comes from Watawala’s estates. Besides operating the island’s sole oil palm processing factory, Watawala also produces around a million kilos of rubber and over six million kilos of palm oil.