See 15% plus rise in tea prices in 2016: McLeod Russel

Tea prices will pick-up from next year, says Kamal Baheti, CFO of McLeod Russel. Prices will rise by 15 percent plus from 2016 onwards, he adds."Indian prices, not only in the next six months, but going into the new year will be very strong as compared to what it had been in the previous months," he says

Baheti says loss in tea crops were to the tune of 25 to 30 million this year. He expects tea prices to increase by Rs 15-20 per kg before the year-end. However, the price rise will not bring any change in profitability in the current fiscal, he adds.

Improvement in overseas operations will aid growth in FY16, he said adding that consolidated revenues will see a rise by 10 percent.

Below is the verbatim transcript of Kamal Baheti’s interview with Ekta Batra & Latha Venkatesh on CNBC-TV18. Ekta: There are mixed reports that seem to be with regards to what is happening with tea prices. For example Bangladeshi tea prices are up because of the winter season being quite strong but Kenyan prices are expected to possibly decline in the second half of the fiscal, your thoughts on where the prices are currently? A: If you really look at right from the beginning whether it is Kenya or India everybody there had been a substantial loss of crop. Kenya lost around 45 million kilograms of tea, India has lost around 25-30 million. Tea prices in Kenya has gone up by 30-40 during the year. So, there will be some correction which will be there. Indian prices and Bangladeshi prices were struggling till September because of the supplies which remained in the system because of the seasonal nature of the business. We are coming towards the end of the season and the winter is coming in the consumption is growing.  The price trend is also changing so prices both in India and Bangladesh in these areas are increasing now where as it is more or less stable as far as Kenya is concerned. I think we are pretty sure that the Indian prices, not only in the next six months, but going into the new years will be very strong as compared to what it had been in the previous months.  Latha: How much stronger you think? A: If we really look at how the prices had been till September, we are lower by around Rs 3-4 as compared to last year. If I compare October on October we are higher by Rs 10 per kg as compared to last year. Last year we had seen a drop in prices, we are seeing increase in prices this year.  I won’t be surprised if the gap increases to around Rs 15-20 per kg by the end of this fiscal year. However, when we open for the new season because the carried forward tea will be substanially lower as compared to last year because of the lower production and higher exports I see another 15-20 percent increase in the next year as compared to the opening prices last years. So, prices trends from now on till August-September next year seems very strong.