Tata Coffee to invest in Uganda unit

Bangalore: Tata Coffee proposes to raise long-term debt to fund its instant coffee manufacturing facility in Uganda.

M.H. Ashraff, Managing Director, Tata Coffee, said the company has teamed up Tata Africa, an associate company, to set up a 3,600-tonne instant coffee unit. The total investment is expected to be in the region of Rs 50 crore, in a debt and equity ratio of 2:1.

Tata Coffee and Tata Africa will be sharing the equity component, contributing about 33.33 per cent of the proposed Rs 50-crore investment, while the rest would be raised through debt from funding agencies, he said.

Ashraff said the ICRA-prepared detailed project report has been circulated to funding agencies such as EXIM Bank, CDC and IFCI among others. The Ugandan project is expected to take off in February, once the funding is tied-up, he added. |Read more Finance news.|

The company decided to take the debt route as “we preferred to reserve the equity option for the potential big-ticket brand acquisitions,” Ashraff said. “We did evaluate a couple of proposals for acquisition in the recent past, which they didn’t fit our business plans,” he said.

As Uganda is one the most backward countries, its exports enjoy a special status from countries such as the US, the European Union, Russia, Japan among others. “We plan to capitalise on that,” Ashraff said. “Currently, these countries allow duty-free imports of commodities from Uganda. Further, there is a possibility of allowing value-added imports in due course and it would surely benefit the new project,” he added.

Tata Coffee would also leverage its Ugandan operations to foray into the Chinese market. “A sizeable quantity of Ugandan coffee is currently sold in China, which has emerged as one of the big coffee consumer,” Ashraff said. Tata Coffee shares closed at Rs 330.35 on Thursday on the Bombay Stock Exchange.