Tata Chemicals Starts Trading Without Food Business

Tata Chemicals Ltd. started trading on the bourses after the consumer division was carved out of the specialty chemicals maker as part of the Tata Group’s efforts to streamline its operations.

The salt-to-software conglomerate in May last year announced its plans to consolidate its consumer business under Tata Global Beverages Ltd., one of the biggest makers of branded tea and the owner of Tetley. As part of the deal, shareholders got 114 shares of Tata Global for every 100 held in Tata Chemicals. The consumer business transferred to Tata Global included sourcing, packaging, marketing, distribution and sales of Tata Salt, pulses and spices under the Sampann brand, and its snacks business.

Deutsche Bank values Tata Chemicals’ soda ash and specialty chemicals businesses, excluding the consumer business, at 7.8 times its price-to-earnings estimates for financial year 2019-20. That, according to the global research firm, is “attractive valuation”.

IIFL Securities said the demerger would “unlock the hidden value in Tata Salt” and enable the company to focus on one business — chemicals.

Tata Chemicals’ current revenue mix between basic and specialty products is 80:20. The company now aims to change the revenue mix to 50:50 over the next five years, while growing the revenue pie by 2.5 times from its current size of Rs 10,300 crore as of March 2019, according to its investor presentation.