Companies

Dhunseri tea eyes African estates

Shobha Roy Kolkata | Updated on November 21, 2019

TGBL had, in April this year, entered into an agreement to acquire the branded tea business of Dhunseri Tea for about Rs 101 crore

Dhunseri Tea and Industries, which recently completed the sale of its branded business to Tata Global Beverages (TGBL), is exploring possibility of acquiring tea estates in Africa.

According to CK Dhanuka, Chairman, Dhunseri Tea, the company will look at assets in Africa if the pricing is attractive.

The company produces close to 21 million kg (mkg) of tea through its estates in India and Africa.

“We will look at some useful assets in tea either in Africa or in India, if the pricing is attractive. The tea market in India is currently not too favourable, so we will look at Africa for expansion,” Dhanuka told BusinessLine.

TGBL had, in April this year, entered into an agreement to acquire the branded tea business of Dhunseri Tea for about ₹101 crore. Dhunseri Tea used to operate in the branded tea business under the Lal Ghora and Kala Ghora brands. These were among the leading local brands in Rajasthan, a market dominated by local players.

Dhunseri Tea is yet to decide on the deployment of funds received through the sale of its packet tea business. For now, the funds will be deployed in secondary market, he said.

Troubled times

The tea industry in India is going through “very difficult times” and profitability has been under pressure for most players, Dhanuka said.

The industry has been reeling under the pressure of rising costs and lower realisation exerting pressure on profitability.

The company recorded eight-fold growth in its standalone net profit to ₹89 crore for the quarter ended September 2019, as against ₹9 crore in the same period last year.

The surge in profit was mainly on account of exceptional items of ₹101 crore.

Exceptional items represent a net gain on sale of land at Jaipur, Rajasthan (included under “Assets held-for-sale” for the year ended March 31, 2019) and net gain on transfer of the branded tea business, namely Lal Ghora and Kala Ghora to Tata Global Beverages Ltd, the company said in its note to accounts to stock exchanges.

“Whatever operating profit we have seen in the first two quarters we will not see in the third and fourth quarter. The situation of the tea industry is bad and I do not expect to see any marked improvement anytime soon,” he said.

Published on November 21, 2019

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