Jay Shree Tea to demerge sugar biz

Jay Shree Tea has entered into a scheme of arrangement, in which it would demerge its sugar division into a separate company and a trust.In an interview with CNBC-TV18's Mangalam Maloo and Reema Tendulkar, DP Maheshwari, MD of Jayshree Tea, explained the development as well as discussed trends in the tea sector.Below is the transcript of the interview on CNBC-TV18.Mangalam: Could you give us a sense of what this scheme of demerger for Jayshree Tea will be going forward as a person who is a shareholder of Jayshree Tea, who holds 100 shares, how much will he get in the other companies that you are likely to demerge into?A: This company which we are going to demerge into will be a 100 percent subsidiary of Jayshree Tea. So, no question of shareholder, it is not a vertical demerger. The whole idea is that we want to limit the liability of this company and restrict it to sugar alone. As you know, sugar industry is not doing well as a whole and of course, we now expect that something positive will come because Prime Minister has started taking interest like exporting four million tonnes of sugar. If something like that happens, probably situation would be resolved, but our whole idea is that the main company should not get affected by the vagaries of what is happening in the sugar industry and that is why we are demerging. And along with demerger, we are also actively looking if we can dispose it of. We are trying for that also.Reema: Have you started negotiation for selling off and what could be the potential valuation?A: At the moment, as you know this industry’s condition is such, there are no takers. But, this is, maybe things will not remain like this. And maybe, either this year end or maybe next year, we will be in a position to dispose it of. That is our whole idea.Mangalam: You spoke about the fact you want to concentrate on the tea business, but tea prices have been falling for the last five consecutive months. So, how is the trend looking for the tea business in itself?A: If you ask me in general, for the last three weeks, the prices have started showing a little improvement for the simple reason that Kenya’s crop is down by 50 million kilogram. India’s crop is well ahead by 29 million kilogram, has come down to just 10 million. And with the normal increase in consumption as well as more off-take from Iran, we expect prices in general will start looking up. If you take my company’s case, fortunately we had been following good practices and producing really good quality in every area where my gardens are. And I am not behind last year, though the market in general is behind by almost Rs 12-14 a kilo, I am on the contrary ahead of that. So, that is an advantage to us. But then, speaking for the industry as a whole. I personally feel that it is a question of time, maybe within a month’s time, we will make up whatever deficit we have with last year and start showing some gain.