Warren Tea inks MoU with Swananda to dispose Sealkotee estate in Assam

Warren Tea Ltd, one of the country’s oldest tea producers, has signed a Memorandum of Understanding with Swananda Tea Private Ltd to dispose its Sealkotee Tea estate in Assam for an estimated consideration of around ₹19 crore.

Warren Tea owns seven tea gardens in Upper Assam and produces close to 8 million kg of tea — both CTC and orthodox. The company’s produce is sold in Gujarat, Rajasthan, Maharashtra, Andhra Pradesh and Bengal and a substantial volume is also exported to UK, Germany, the US and several Gulf countries.

The Sealkotee Tea estate, with estimated revenue of ₹9.47 crore, accounted for nearly 8 per cent of the company’s total revenues, which stood at around ₹119 crore for the year ended March 2019.

“It has been decided to dispose of Sealkotee Tea Estate situated in Assam, subject to necessary approvals in this regard. For the said purpose, the company has entered into a MoU with Swananda Tea,” the company said in a notification to the stock exchanges on Friday.

According to Vivek Goenka, President of Warren Tea, the sale proceeds would be used to “reduce debt” and “reinvest in upgrading existing tea estates”.

Reducing debt

Warren Tea had earlier this month taken the Board approval to monetise certain tea estates and other assets. The proceeds from such sale would be used to consolidate and strengthen its financial position including containment and optimisation of liabilities, including borrowings, and towards improvement of the company’s overall performance, it had said. For the year ended March 2019, the company posted negative operating profit margin at (17.14 per cent). This was a further decline from an OPM of (6 per cent) posted in FY18. The net profit margin also declined to (13.43 per cent) as on March 2019 as against (6.63 per cent) same period last year. Decrease in Earnings before Interest and Tax (EBIT) was primarily due to steep rise in labour wages and other input costs during the year coupled with decline in unit price realisation, the company said in its recent annual report.

“A part of the sale proceeds would be used to reduce debt, and focus on upgrading our existing gardens for quality tea (production) and better price realisation,” Goenka said.