Excerpts from CNBC-TV18’s exclusive interview with Percy Siganporia:

Q: Can you start off by telling us what was the overall consideration in terms of profits on account of the stake sale of Energy Brands and by when do you hope to book that complete amount into your books?

A: As you are aware, this entire sale transaction from Energy Brands is going to bring into the total business at a consolidated level, a profit of approximately USD 415 million. Most of this profit is going to rest in our subsidiary Tata Tea GB because the funding for the acquisition was routed from that particular organisation’s subsidiary, Tata Tea GB Investments.

Some of the cost for that acquisition has been flowed back into Tata. And, that is how you will find in our quarterly numbers, the impact both on standalone approximately Rs 10 crore and for the consolidated business about Rs 66 crore, as it has been the quarter’s cost of the bridge loan financed for this acquisition. Since this transaction is concluded, the net benefit will accrue only upon the conclusion, which we expect will take place after the second quarter.

Q: So, you are saying that you will book this entire USD 415 million in the current financial year?

A: That is a possibility. As you are aware, it is conditional and we intend to complete it. But definitely, during the course of this year, we will see the benefit of it coming through in our consolidated business and not in Tata Tea’s standalone business.

Q: You have spoken about the financing cost on account of the bridge loans. Could you tell us what the impact of the higher advertising and promotional cost were at the operating level both on a standalone and consolidated basis?

A: There is not too much of an increase in terms of advertising or sales promotion expenditure, either in the Indian business or the consolidated business.

If you really look at comparatives, we have to realise that during this particular first quarter this year, we have added the turnover of the Eight O'Clock Coffee acquisition for the first time. So, their topline, expenditure lines and P&L, etc, come into the consolidation. Therefore, on a line-to-line, it is not a strictly comparison because of the additive factor of the Eight O'Clock Coffee numbers.

If you look at Tata Tea’s standalone numbers, what we really have is an advantage coming through because of the Indian business. Tata Tea have delivered a stupendous growth of almost 18% in terms of volume and closed on to almost 20-21% in terms of value for the branded business portfolio in India. The overall growth in turnover is about 14%.

The growth that we have done in the Indian business has also been led through not just with the marketing mixed elements, but also allowed funding of new product activity. We have launched ‘Tata Tea Life’ in the first quarter and that reflects the sort of growth that we have achieved during the quarter.

Q: Your growth for the branded tea business was 18%, is that correct?

A: Yes.

Q: Could you also tell us specifically with regards to Eight O'Clock Coffee, what was its contribution to your revenues as well as bottomline for this quarter?

A: We have consolidated all the businesses to it. Eight O'Clock Coffee has contributed close to around Rs 150 crore of the total turnover. If you really look at its profit contribution, it has been in line with about Rs 28-29 crore.

Q: Have you been able to maintain market share across most of your products through the first quarter and could you highlight any aberrations if at all?

A: The news on market share is excellent. If you look at the Tetley business, across Great Britain the market shares have increased. This is a quarter in which they have left market shares crossing 30% in terms of volume market shares. They now lead market shares both in terms of volume and very definitely in terms of value.

If you look at the Canadian business, we have lead market shares for black tea, which we have maintained. We have also grown both for black tea and our specialty tea business whose market share is now reaching 25.5%. This gives us brand leadership for the segment mainly driven by the green tea initiative. If you look at the growth of green tea in Canada, this is the fastest growth story going. The category has grown by almost 25% and Tetley’s category sales in that have grown by 56%. 

Secondly, Tetley has also introduced Ready-to- drink, or RTD, in various markets especially in Canada and Great Britain.

Tetley operations in Australia have been good.

Q: Could you tell us what the plans are with regards to Mount Everest Mineral Water, what sort of an investment you will put into it and by when can we expect the open offer? Will you use this entire kitty of USD 415 million to make any further acquisitions in FY08?

A: First, we have not yet come out with the open offer because we are waiting for clearance from SEBI on it. Once the market regulator gives its approval, the open offer will be rolled out. Based on the response to the open offer the closure of the scheme will take place.

Regarding growth and investments, as you can make out from our acquisition price, we have fairly ambitious plans to grow the brand both in India and abroad. There is a team addressing it.
 
During the course of this year USD 415 million will come in to the consolidated business. We have also leveraged debt both in Tetley and to some extent in other parts of the business.

We shall look at best options for utilising that fund either for growth or to manage our business, so that we have a more robust growth model going forward. Definitely, it has made the assets of our business far more lucrative than ever before.