DP Maheshwari, MD & CEO of Jayshree Tea and Industries said that prices are going up only for the quality tea production.
Tea prices have been going up because rise is seen in daily auction.
However, DP Maheshwari, MD & CEO of Jayshree Tea and Industries said that prices are going up only for the quality tea production. Common and medium tea prices are struggling.
Below is the verbatim transcript of DP Maheshwari's interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.
Sonia: It is good to hear that team prices are going up but what could be the reason for that?
A: The price is going up for the quality segment of tea. The common, medium tea even today is struggling. The prices were lower than last year, year-on-year, but whoever is producing good quality tea, the prices are quite good. The reason is demand-supply. March had a fantastic crop though the year started on a very good note, Rs 20-25 higher than last year and because of excessive March crop there was dampening in sentiment and prices came down but April and May because of over rain especially in north east India, basically Assam; there was no rain in west Bengal, so drought situation is there. So the crop position ending May, is my perception, it is more or less same as last year. So definitely, prices will go up and will remain firm throughout the year.
Latha: What does it mean to a company like Jayshree Tea and several other companies? I guess you all have your own tea garden. So in your case, it will be in better margins?
A: It will be much better margin. I expect my sale prices to be higher by at least Rs 15 per kg for the full year. The cost will be going up by Rs 8-10 per kg, which I expect to cover-up buy additional production because in the last ten years we have been doing a lot of intensive development work, which is now bearing fruits. My crop is growing and that will cover the cost and I should get additional 15 percent margins because of the pricing.
Latha: Which are the big companies that have in-house tea gardens?
A: All the big companies have their own garden. My company have 26 gardens.
Sonia: You were saying that you have Rs 15 profit that you could make or higher value. What would that do to EBIT of your business because you are still seeing losses over there but the losses are lower than what we have seen the last time? When do you think you could get into the black for the tea segment particularly?
A: Tea segment last year, except the last quarter, is very much in black with healthy profit. This year from Q1 itself we will start making good money. However, we make around 23 million kg of tea, so Rs 15 means Rs 30-35 crore. Therefore, I definitely expect Rs 20-25 crore additional profit from tea business for my company.The Great Diwali Discount!
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