Tata Tea To Earn Rs 122 Cr More On Price Hikes

Tata Tea, the tea major of the Tata group, is making the most of the good year and will earn roughly an additional cash flow of Rs 122 crore this fiscal, as the average auction price for all types of tea has increased by a little less than Rs 20 per kg.

But currently, the company is consolidating its activities and has not chalked out any specific investment plan for the future. It will reserve its additional cash flow for contingency purposes, Tata Teas newly appointed managing director S M Kidwai told Business Standard yesterday.

The good news for Tata Tea is that it is finally in the news again because of its excellence in performance. It has negated all fears that its performance would be hit by the controversy in Assam in the first half of the current year and is confident of ending the year on a much higher note. After all we are a plantation company and plantations cannot be affected by controversies, Kidwai said.

 

In the first half, the company notched up a net profit of Rs 50.31 crore, a 42.5 per cent increase over the corresponding period of the previous year. This trend will continue till the end of the fiscal, he said. We promise a better return to our shareholders this time, said an upbeat Kidwai.

Kidwai ducked questions related to the controversy over the alleged payment to terrorists. Talking about the companys ambitious acquisition plans in India and abroad, the new MD said, We are on the lookout for new gardens and would like to expand our production base. But the company has not been able to make much progress so far this year due to the boom in tea prices.

Most of the Indian tea producers, who have earlier shown interest in selling their gardens, are not willing to do so now, as they are reaping the benefit of high prices. Otherwise, they are demanding much high prices for the gardens. Hence, before going for any further domestic acquisitions, Tata Tea is waiting for the prices to stabilise.

In the current year, out of its total production of 61 million kg, that of packet tea is 45 million kg and instant tea is 4.7 million kg. Our thrust is primarily on packet tea segment, he said.

Tata Tea is aiming to have a global size to take on increasing competition with multinationals. But, when asked about its competition with Hindustan Lever (HLL), the managing director said, We have sustained a steady growth in the packet tea segment and do not consider it any major threat to us.

Kidwai said he does not foresee any hurdles in financing its new projects. We are on a strong foundation and we always have the option to go for external commercial borrowings or enter the capital market, he added.