The company has cut the bonus payable to pluckers in the festival season and linked wages to productivity.

Treasury income declined from Rs 3.3 crore to Rs 1.1 crore. This is in line with the trend in the debt market where interest rates have not fallen by much.

Tetley performance, a mixed bag

Tetley, in which Tata Tea holds a 98.6 per cent stake, recorded a 12.8 per cent decline in its revenues in the quarter ended December compared to the corresponding previous quarter.

But revenues have been impacted by the sale of its bulk tea business in the US. Profits have increased by 60 per cent to £17.9 million.

The company has indicated that the debt restructuring undertaken the previous year had resulted in lower outgo on interest, helping profits to grow.

The impact of any change in accounting relating to amortising is not known. If the change has had a significant impact, it will affect the quality of Tetley's profit growth.

Rising competition

Another area of concern relates to competition. Tata Tea and Tetley together derive more than 80 per cent of their revenues from black tea, whose market is shrinking and is marked by a few large players.

Tata Tea is one of the bigger players in the packet tea segment and any strategic moves from others can impact Tata Tea's revenue growth.

Over the past two quarters, HLL and Godrej, the latest entrants, have been promoting their products aggressively.

Tata Tea has, however, not aggressively responded to such moves in the past one year. Except for the launch of Tetley tea bags and Tata Tea Gold, the absence of aggressive marketing initiatives has been conspicuous, especially in the face of HLL's relaunch of the `Brooke Bond' umbrella brand.

The rise in competition is of concern to Tata Tea and Tetley in the light of their stagnating market shares of Tata Tea and Tetley.

So far, however, competition has not made any dent on Tata Tea's hold on the market. Market shares have remained largely unchanged in India, the UK, Canada, and the US.

Tetley has gained market share in Australia in the past one year, but sustaining and replicating it in other markets hold the key to its future growth prospects. In this context, the launch of products augurs well. Shareholders can hold on to the Tata Tea stock in the light of its steady performance.

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