* First foreign expansion for green tea supplier
* Also to expand capacity at home to serve growing demand (Adds investment strategy details, share reaction)
By Khettiya Jittapong
BANGKOK, Aug 26 (Reuters) - Thailand's largest green tea maker Ichitan Group said on Tuesday it would set up a joint venture with Indonesia's PT Atri Pasifix to build a new plant in Indonesia with an authorised capital of 1.18 billion baht ($37 million).
The move is the first foreign expansion for Ichitan, part of a drive to tap into a market where demand for green tea is expected to grow at an average of 15 percent a year, the company said in a statement.
Ichitan said it will invest 592 million baht, buying a 50 percent stake, in the joint venture expected to be set up in the fourth quarter.
"The Indonesian partner has distribution channels in modern trade and convenience stores nationwide. This will help boost Ichitan's marketing and sales opportunity," the statement said.
The Thai firm said it plans to give a loan of 836 million baht in future funding to the Indonesia partner. When the loan is formally granted will depend on actual revenue and the construction of the new plant, Ichitan said.
In Thailand, Ichitan also plans to invest 750 million baht to expand capacity at its existing plant in the central province of Ayutthaya.
Tan, dubbed 'the green tea tycoon', set up Ichitan in 2010 after selling Oishi Group to Thai Beverage Pcl , a flagship beverage group controlled by billionaire Charoen Sirivadhanabhakdi.
Oishi, which also operates Japanese food restaurant chains, is also looking for opportunities to expand its green tea and food businesses in Southeast Asia countries, especially in Myanmar, Cambodia, Laos and Malaysia.
Ichitan shares were down 2.7 percent at 0842 GMT as investors took profits on recent gains, having been up strongly on Tuesday before the investment was announced. The benchmark index was 0.1 percent lower.
($1 = 31.8900 Thai Baht) (Additional reporting by Saranya Suksomkij; Editing by Kenneth Maxwell)