We're ready to spend Rs 200 cr to acquire more plantations: Arun N Singh

Interview with MD & CEO, Goodricke Group Ltd

Goodricke, the country’s second largest plantation company, recently launched branded packed tea in Madhya Pradesh, garnering 13 per cent market share. Arun N Singh, managing director and chief executive officer of the group, talks to Vijay C Roy on his concerns and the company’s plans. Edited excerpts:

With tea production coming down, what are the main concerns for the sector?
Over the past few years, production of tea in India has stagnated at 970-990 million kg annually, with consumption rising by two to three per cent yearly. There are some reasons for the stagnancy. First, the tea gardens are over 100 years old and need to be uprooted and replanted, which takes time. Second, climate change, especially dry weather conditions in the eastern area, a major tea belt. Further, the area (sown) has reached almost saturation level and is not increasing.

How far is the sector dependent on small tea growers, whose productivity has been lower?
This has been an issue; their contribution is laudable. Year 2000 onwards, small growers have been contributing 25 per cent of total production.

What is your company’s growth estimates for the current year?
We have around 30 tea estates, spread over Assam and Darjeeling. Last year, we sold about 31 million kg of tea; this year, we are expecting to sell 32 mn kg. We follow the calendar year; last year, our group turnover was Rs 650 crore and this year we are expecting to touch Rs 675 crore.

You are aggressively pushing packed tea sales. How do you see the packed tea potential in India?
There is immense potential. It is growing by leaps and bounds. Currently, in volume terms, the packed tea market is 46 per cent (of the total); valuewise, it is 63 per cent. By 2016, the sector expects it will touch 61 per cent by volume and 67 per cent in value. Keeping this in mind, we relaunched Goodrick Chai in a premium new avatar. We are currently the largest and highest selling tea brand packet in Madhya Pradesh, accounting for a value share of 13 per cent. We hope the new launch will add at least a million kg per annum to n our sales kitty.

So, increasing the focus on packed tea is your next big thing?
We are also expanding in plantations. We are the second-largest tea manufacturer in the country, with 30 owned gardens in Darjeeling, the Dooars and Assam. And, exploring the possibility of acquiring tea gardens in Assam. We are looking to add four-five million kg in the existing capacity. For the purpose, we had made a budgetary provision of Rs 200 crore, to be funded through internal accruals and term loans from banks.

What is the expansion plan in the dairy sector?
We have plans to diversify in the sector. Our project report is ready and very soon, we would submit it to the Reserve Bank for approval. Currently, we are running a research and development dairy project at Jalpaiguri district in North Bengal. Goodricke plans to scale up the project into a commercial venture. We are part of the UK-based Camellia Plc, and permitted only to do tea and tea-related businesses in India; for any diversification, we need RBI approval. The estimated project cost is Rs 25 crore.