Tea prices may rise further by Rs15-20/kg: Mcleod Russel

Kamal Baheti, CFO, Mcleod Russel expects tea price to rise by Rs 15-20 per kilogram going forward.

In an interview to CNBC-TV18, he said last year prices increased by Rs 20-25 per kilogram due to drop in crop both in North and South India. "Stagnant production and increase consumption led to low inventory level which is impacting prices and the increase will continue throughout the year and in 2014 as well," he added. Below is the edited transcript of his interview to CNBC-TV18. Q: What is the reason for the rise in tea prices at the Coonoor Tea Trade Association? Do you expect to see tea prices firming up even further? A: Last year there was an increase in tea prices by around Rs 20-25 per kilogram due to drop in crop both in North and South India. These are the prices of South India. Season in North India will open by mid-March, when production will start, and we should see the first price. We expect prices to be higher by at least Rs 15-20 per kilogram or even more going forward.    Q: How much volume drop can we see on a year-on-year basis? A: It is not the case of drop in volumes. Last year due to weather issues, the production has been stagnant and on the other hand the consumption was growing, low inventory level is having an impact on the prices and the increase will continue throughout the year. The same trend is likely to continue in 2013-14, so we may see an increase in price by Rs 20-25 in 2012-13 going into next year as well. Q: How much improvement in margins do you expect? A: I the crop output is normal this year then the cost increase impact could be minimal because we had a major cost impact in 2012-13. Any increase in prices, 90 percent of that should reflect at the bottom-line and the EBITDA level. We expect margin to be in the range of 28-29 percent in 2013-14.