Tata Tea

In: Business and Management

Submitted By jazzjazzb
Words 7354
Pages 30
The Employee Buy out: Case of Tata Tea
Dr Deepika M G, Faculty, Icfai Business School, Bangalore, India

ABSTRACT
The article discusses about the Employee Buy Out business model adopted by Tatas on their exit from plantation business in their southern plantation operations in Munnar district of Kerala in India. Tata Tea had sold off 17 tea estates in southern India to the company formed by its employees named Kanan Devan Hills Plantation Company Pvt. Ltd.(KDHPCL). In sharp contrast to the situation in the tea industry experiencing closures affecting thousands of employees, KDHPCL with 13,000 employees could not only recover within a year the loss of $ 24 million run up by Tata Tea, but could also register a post tax surplus of $ 50,000 as on March 31st 2006. However, when Tata Tea went onto implement a similar model in the North Indian Plantation Operations, it met with considerable resistance. The article discusses about the crisis that was facing the tea industry in India, the role played by Tatas in the formation of the KDHPCL and the challenges faced by the employees of South Indian Plantation Operations in accomplishing this unique business model. It also critically reviews the factors that are essential for the success of Employee Buy Out, by enumerating the factors that led to the success of EBO in southern operation of Tatas and its failure in their northern operations.

INTRODUCTION

In February 2007, Tata Tea, an INR 3500 crore beverages company, decided to divest a major portion of its shares in its North Indian Plantation Operation (NIPO) to a group of investors and its own employee co-operatives. To be called as Amalgamated Plantations Pvt. Ltd. (APPL), it would cover a vast portion of tea estates of 24,000 hectares in Assam and West Bengal. Retaining only 20% of its stake in the new company, the remaining was to be bought by Infrastructure…...

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