Mcleod Russel, a listed tea producer, expects to make operating profits of close Rs 50 crore from overseas operations. The company plans to expand into new geographies through acquisitions. Kamal Baheti, CFO at the company, said that the company was looking at acquisitions in Vietnam and Uganda.
McLeod Russel’s subsidiary and a holding company for all its overseas tea companies, Borelli Tea, has concluded a deal with a tea company in Rwanda.
The company has witnessed an over 31 per cent decline in its share price over the past six months. Shares hover around an 18-month low.
He said that the current debt of the company stands at Rs 318 crore. “Our overseas operations are likely to give an EBIDTA (operating profit) of around USD 15 million, which will be used to reduce debt or pursue more acquisitions outside India, particularly in Africa,” he explained.
India, the world’s second largest tea producer after China, accounts for about 30 per cent of the global tea production. According to the industry body ASSOCHAM, India’s tea industry is likely to touch Rs 33,000 crore by 2015 as different varieties of herbal and ice tea are gaining immense popularity.
However, India’s production during October-November has dipped by 15-20 per cent.
Baheti said that that India’s tea estates have closed down production due to early winter, which is the key reason behind the production cut.
“India may lose around 10-15 kg during the period of October to December. This year the winter has set in a bit late, so most of the factories must have shut production by now. But otherwise, we were ahead by 37 million kg up to September.” said Baheti.
He said that late winter has led to a production drop of 15 million kg in the last quarter.
This clearly means that the tea supply will shrink and the demand will rise, which will lead to an increase in tea prices. “Higher tea prices will give a good start to the industry,” said Baheti.
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