Top Nifty Gainer: Tata Consumer, Tata Coffee shares surge on news of merger announcement

Tata Consumer Products Limited's shares surged over 5 per cent on Wednesday to touch a day’s high level of Rs 782.5 on the BSE on the intraday basis. The surge was on the back of news of restructuring of domestic and global businesses of the company. It was also the top Nifty50 gainer around 11:20 am. 

The Tata Group company in its exchange filing announced a restructuring of domestic and global business to simplify, align and synergize its business.  

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This plan includes the demerger of the plantation business of Tata Coffee Limited (TCL) into TCPL Beverages & Foods Limited (TBFL), a wholly owned subsidiary of TCPL and the merger of the remaining business of TCL, consisting of its extraction and branded coffee business with TCPL. 

As per company’s plan, the demerger is to happen as the first step and merger will happen as the immediate second step, both being proposed through a composite scheme of arrangement. Amid this, the shares of Tata Coffee too gained almost 13 per cent to Rs 221.6 apiece on the BSE intraday while gaining over 11 per cent on the NSE around 12 pm. 

Under the scheme, shareholders of TCL (other than TCPL) will receive an aggregate of 3 equity shares of TCPL for every 10 equity shares held by them in TCL, Tata Consumers said in a filing. 

This will be carried out through the issuance of 1 equity share of TCPL for every 22 equity shares of TCL in consideration for the demerger. For the merger, 14 equity shares of TCPL will be issued for every 55 equity shares of TCL, it added.  

Besides, the Board of Directors of TCPL have also approved the purchase of a 10.15 per cent minority interest in its UK subsidiary, TCP UK, from Tata Enterprise (Overseas) AG, Switzerland (TEO). Stakes of Tata Enterprises (Overseas) Switzerland will be bought for Rs 571 crore. 

A global investment bank Morgan Stanley likes Tata Consumers' focus on consolidation and simplification of business structure. It maintained an Overweight stance with a target price of Rs 886 per share, which implies around 20 per cent upside from Tuesday’s closing price of Rs 743 apiece.