The Hindu Business Line : McLeod Russel plans to go slow on exports

Kolkata, July 30 McLeod Russel India Ltd, a major producer of tea proposes to go slow on exports in the current year and focus more on the domestic market.

Mr Aditya Khaitan, Managing Director of McLeod Russel, said the bumper crop in Kenya and the appreciation of the rupee, particularly in terms of the US dollar, had rendered exports an unattractive proposition.

Mr Aditya Khaitan was talking to newspersons at the end of the company’s annual general meeting here on Monday. The company’s exports in the current year, he estimated, would be about 21-22 million kg against 25 mkg in 2006-07 and an estimated 12 mkg of the current year’s exports would be in the dollar denominated market.

Earlier, Mr B.M. Khaitan, Chairman of McLeod Russel, addressing shareholders, said the company’s exports so far in the current year dropped by eight per cent vis-À-vis the same period of last year.

Tea output

Tea production in the current year, Mr Aditya Khaitan said, would be up by about four mkg to reach the level close to 75 mkg, compared to a little over 70 mkg in 2006-07. This would be possible because of the acquisition of more than 72 per cent stake of Moran Holdings plc in The Moran Tea Company (India) Ltd, having tea estates in Assam.

Also, several measures had been introduced to step up domestic yield. Particularly the replanting programme, initiated in 1996 and so far covering 35 per cent of the total area, had helped achieve six quintal more production per hectare than the industry average, he said.

The unit value realisation in the domestic market would be more this year compared to last year. Last year, the average price of the company’s tea was Rs 86 per kg. However, the price so far had been slightly lower than that in the previous year. But he was confident that the trend would be reversed because of the strong domestic demand, which was growing at more than three per cent every year, and a probable shortfall in domestic production.

The production so far had been less than that in the same period of the last year. The shortfall in domestic availability, along with the absence of carry forward stock, would only lead to rise in tea prices in the coming years.

About Rs 15 crore would be spent this year to step up production of Orthodox teas to seven to eight mkg next year from the present around three mkg,and further to 10 mkg in the year after that. The foreign loan of about $21-22 million would act as hedge against the rupee appreciation, he said.

No definite progress had been made in regard to the McLeod Russel’s plan to acquire tea estates in Kenya. “We’ll only go for strategic acquisition to add value to our customer base”, the Managing Director added.

McLeod Russel would spent Rs 50-60 crore in the next two to three years in the joint venture which Williamson Magor, the holding company, has formed with D1, the subsidiary of British Petroleum, to undertake the production of bio-fuel from jatropha. About 30,000 hectares of land had been acquired by the joint venture company, he said.

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