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Nilanjan Dey
Kohinoor Mandal

Kolkata , Aug 3

THE cup of happiness is overflowing for investors in tea stocks. Large or small, most tea companies are turning out decent performance numbers - a trend that has found a reflection in their valuations.

Tea counters have been generally heading north during the past few months, thanks to the buying interest that is now evident in a number of stocks. Not all are in the league of Tata Tea or even McLeod Russel, currently the two largest plantation outfits in India. Most are actually quite small in comparison.

Stocks that have done particularly well in recent times include Warren Tea, Dhunseri Tea and Apeejay Tea. These and others have surged ahead, some by several times during the past one year. Warren has moved up to Rs 124 (up from Rs 49), while Dhunseri has peaked at Rs 87 (from Rs 26.70).

As investors see it, tea stocks will witness fresh upside as price realisations improve for the industry. Says Mr Rajiv Bose, an investor who follows the local tea scenario, "companies will continue to improve their bottomlines because of certain key reasons". The reference here is to tea producers' growing ability to meet the rising demand as well as to some players' decision to restructure operations.

For the record, majors like HLL or the Khaitans have gone through considerable recast. While the MNC has opted out of the plantation sector and decided to focus on marketing only, the other has consolidated its position through the recent acquisition of Williamson Tea Assam Ltd. In the process, it became the world's largest bulk tea producer.

Stocks that have appreciated lately include the relatively unknown Diana Tea (Rs 33.45 on the BSE, up from Rs 18.65, its 52-week low) and Jayshree Tea (Rs 110.90 on the NSE, up from Rs 43). Their trading patterns, however, underline an absence of large volumes - a feature that, some say, may cause problems.

"Yes, liquidity can be an issue for such companies," observed Mr Sandeep Neema, equity fund manager at JM Mutual Fund, adding that Tata Tea is perhaps the only company with discernable liquidity. The Tata Tea stock is part of the 50-share Nifty.

Tea producers nevertheless try to bypass these worries by referring to the factors that are said to be working in their favour. According to a senior executive of the Indian Tea Association, "the demand-supply situation presents a big opportunity for the industry. Also, companies are attempting to meet changing consumer behaviour by supplying more branded and variants of tea. Brand building is paying off in terms of greater customer loyalty."

Investment circles make a special case of Assam Co, which has started to dabble in the petroleum sector. The stock has been on fire; it closed on the BSE at over Rs 275, its 52-week high and low being Rs 334 and Rs 23 respectively.

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