Tata Tea has decided to separate its plantation and branded tea business into two separate strategic business units.

The company said that while it is working on strategies to revive its ailing plantation business, its focus is on the packaging and branding side of the business, which accounts for around two-thirds of the total revenue.

Homi Khusrokhan, managing director of Tata Tea said: "Our plantation and branded tea business would now be treated as separate profit centres. We are laying further emphasis on cost reduction initiatives that would enable us to stay afloat under adverse market conditions. All fresh launches and innovations under the premium tea category would be done under the Tetley brand."

The company's prime national brands are Tetley, Tata Tea and Agni, while its regional brands include Kanan Devan, Gemini and Chakra Gold.

According to Khusrokhan, the tea business is facing rough weather with falling tea prices. Regional brands have dented the profitability of the company.

With exports to Iraq affected by the war, the company is now focusing on exports to neighbouring countries like Pakistan and Bangladesh.

Meanwhile, the company has managed to reduce the average cost of borrowing from 11 per cent to around 8 per cent by restructuring its debt basket.

Tata Tea has replaced high cost debt to the tune of Rs 75 crore (Rs 750 million) with fresh loans having a lower interest rate of 5.85 per cent.

The total debt of the company stands at Rs 190 crore (Rs 1,900 million). Interest outgo for the year ended March 31, 2003, stood at Rs 14.4 crore (Rs 144 million), as against Rs 21.4 crore (Rs 214 million) the previous fiscal.

Company executives said around 490 employees had accepted the early separation scheme last fiscal.

Currently, the total employee strength of the company is around 57,000, out of which around 56,000 are employed in the plantation business.

Tata Tea posted a net profit of Rs 70.6 crore (Rs 706 million) for the year ended March 2003, as compared with a net profit of Rs 71.9 crore (Rs 719 million) the previous year.