Tea demand rising; FY14 output at 1120-1130mt: Jay Shree

DP Maheshwari, managing director of Jay Shree Tea believes that the government's decision to maintain foreign direct investment (FDI) at 100 percent is positive for the industry. The government on Tuesday hiked FDI caps in various sectors like telecom and tweaked clauses for sectors such as tea.

In certain sectors, it changed the investment route via Foreign Investment Promotion Board (FIPB) approval to the automatic route. Meanwhile, Maheshwari says, the demand for tea has been rising and exports are expected to go up in this fiscal. "The industry may see 1,120-1,130 kilogram million production of tea this year. These factors will attract foreign investors into the tea industry this year," he says. Also read: Government gives nod to hike FDI caps in 13 sectors Below is the edited transcript of his interview to CNBC-TV18. Q: The positive statement that has apparently come from the policy makers that FDI in the tea sector will now come under the automatic route. Was it a big hassle? Is this going to encourage more people to invest in the tea industry? A: Tea industry, traditionally, was held by foreign companies only. It was only in 80s that most of the companies got Indianised. So yes, those connections are always there. I don’t think there will be a big rush of investors coming in to making use of this provision. Anyway, it is a good thing. Once you have that, anytime anybody can come and acquire a company and plantations. Q: Are you nosing around for any capital or strategic support from any global tea company? Will you make use of this window? A: Why not? If we have something useful coming and it is useful to us, yes. At one time, we were thinking of the qualified institutional placement (QIP) option. We have got an enabling resolution. So if something comes, yes, we are open to it. Q: The key here is that in any case earlier also the FDI was allowed. The only caveat was that at some stage, the foreign partner will have to (divest) 26 percent back to the Indian partner. Even then we haven’t seen too much of investments in this space. What would change? A: The plantation was not all that attractive being a land-based, agro-based industry. It is a commodity basically. It was not doing all that well. But now there will be some interest because as a commodity worldwide, it is doing very well. There is very healthy demand everywhere. All the health benefits of tea are now well known. So tea demand is growing and there might be some interest. I am very hopeful about it. _PAGEBREAK_ Q: This sector has a lot of unorganized players. Do you see a bit of a consolidation now because of this? A: The unorganized or the small grower sector today is not a small thing. Almost 35 percent of India’s tea is produced by them. Basically, it is a farmer himself doing instead of growing rice or vegetables or something else is growing tea. So, this is his everyday’s work. But, there is a possibility that a few of them might get together and have these self-help groups which has already invoked. This can happen. But, other than that, I do not think much of the consolidation. The holding is too fragmented. Q: How is tea business fashioning up in FY14 in terms of volumes, prices, realisations? A: May figures are out. We are ahead by around 6 million kilogram and our total production for the last year was 1,112 million. It was less by 3-4 million. So, we expect that the June production is going to be low. However, I am very hopeful that production wise, we should be in a position to make around 1,120-1,130 million kilogram during this year. The consumption is growing with a very good healthy rate. We are not very sure whether it is 3, 2 or 4 percent. But it is growing. Exports also are taking place. So, on the whole, the tea business is doing very well. Like last year, this year also should be a good year for the tea company. Prices wise, the Assam top quality is doing very well. Their prices are higher than last year. But the common medium like Juar etc there is a drop in prices which will pick up now.