The larger objective of the Tata Group is to grow Tata Global Beverages beyond tea into a food and drinks major like Pepsico or Nestle.

Tatas in talks to buy Paper Boat to expand Tata Global Beverages portfolio
Atom M&A Tuesday, February 13, 2018 - 14:05

Tata Global Beverages Limited, TGBL, the FMCG arm of the Tata Group is said to be keen on expanding its product offerings beyond just tea and coffee. The company has now reportedly approached Hector Beverages, a startup that sells the Paper Boat brand of juices. The larger objective of the Tata Group is to ultimately grow TGBL into a food and drinks major like Pepsico or Nestle.

Paper Boat sells juices such as aamras, jaljeera and aam panna and has been able to build up a sizeable customer base across the nation. Though the startup has been posting losses, it is hopeful of turning the corner next fiscal. 

Observers see this move by the Tata Group as a shift in its strategy after the new Chairman N Chandrsekaran took over last year. The Group recruited key personnel to take the initiative forward and develop dairy products to add to the existing products being marketed by TGBL.

The other area the company may focus on is ethnic snacks. The desire to acquire Paper Boat has to be seen in this background. The talks may be at very initial stages and may or may not materialize. Interestingly, one of the co-founders of Paper Boat has sternly denied any such talks being held with the Tata Group for a possible takeover. He has said that the company is committed to build its business independently and this is supported by its key investors such as Sequoia Capital and Catamaran Investment (floated by Narayana Murthy).

While this is so, there are people who confirm that negotiations have indeed started. There could be some issues with the valuation of the startup as well. The last time Paper Boat raised funds, its value was pegged at around Rs 650 crore. Experts feel the investors may want it to be around Rs 1000- 1200 crore now.

The Founders believe that the current level of business has been generated by sticking to just top 6 cities in the country and once it expands beyond that, the figures may jump multifold.

For Tata Global Beverages, tea has been it mainstay contributing to over 71% of its revenue. Coffee and water make up the remaining 29%, though a snack range chikki has since been added to the portfolio recently. The new management under Chandrasekaran appears to be keen to improve things within this vertical.   

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