Goodricke Group is planning to expand its business in Assam through acquisition of tea gardens, in a move that will help the company “balance” its orthodox and CTC (crush, tear, curl) tea production and reduce its dependence on West Bengal.
The company’s all eight tea gardens in Darjeeling have been closed since early June because of the Gorkhaland agitation, and the resultant financial impact on the firm has been to the tune of Rs 20 crore. Last year, operations in some of its gardens in Dooars in West Bengal were affected due to labour unrest and low uptake. In comparison, its gardens in Assam had fared better.
“The idea is to balance our tea gardens across West Bengal and Assam as well as the CTC (crush, tear, curl) and orthodox production,” A N Singh, the company’s managing director, told Business Standard.
Asked if the production loss in Darjeeling has been a key factor in the decision, Singh said, “Yes. In Darjeeling, as of now, we have lost Rs 20 crore of revenue and expect to lose almost half the crop. Even if we can open (gardens) in the first half of August, then also we will suffer losses.”
He said some of the company’s gardens in the Darjeeling hills were not “making money”, hence the ongoing strike would increase the burden on the company.
“In terms of the revenue, it’s not very big. But it has a very important portfolio with us. We feel that with our ability to produce very good tea, it makes a lot of sense to acquire gardens in Assam,” Singh said. Industry officials suggest that although the tea industry is faced with low price realisations from auctions with a stagnated export market and rising production costs, Assam gardens are better off.
“The yield per hectare in Darjeeling is around 500 kg per hectare, while in Assam, it is as high as 2,000 kg per hectare. Thus, it makes sense for a company to invest in gardens in Assam, if one is looking at a CTC portfolio and high yield,” an industry official said.
Singh said that by the next year, more gardens would be on sale in Assam. “We will find gardens at right prices and right locations. Initially, our targeted production capacity is 2 million tonnes (mt), but then again it depends on the right gardens,” he said.
Industry estimates suggest that a typical 2 mkg (million kg) garden in Assam will cost anywhere between Rs 80 crore and 100 crore. However, the company will have to first identify the gardens and then get the board’s approval.
Currently, the company directly owns 17 gardens, of which 12 are in the Dooars area, three are in Darjeeling and two in Assam.
Stewart Holl (India) Ltd owns four gardens in Assam; Amgoorie India Ltd owns two gardens in Assam and five gardens in Darjeeling; and Koomber Tea Co. Pvt. Ltd has two gardens in Assam. The three are Goodricke’s associated companies.
Although Dooars contributes 85 per cent of the company’s annual tea production at 15.92 mkg, Assam accounts for 13 per cent at 2.41 mkg and the Darjeeling plantations 0.45 mkg. The company earns exorbitant prices both in the domestic as well as the export market from its gardens in Darjeeling and Assam.
The company’s select produce from the Badamtam garden fetched an exorbitant Rs 12,900 a kg in a private sale while production of the prime tea from the Castleton estate had risen to touch Rs 7,000 a kg. A 140 kg prime produce from the Dejoo garden in Assam, which only produces Assam orthodox tea, fetched the company Rs 4,50,000 this year in a private sale.
However, the ongoing Gorkhaland agitation has brought tea production to a halt in Darjeeling, affecting the company’s operations in the region.
Source: Business-Standard