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Focus on Rubber
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Calcutta, Feb. 22: RP-Sanjiv Goenka Group-controlled Harrisons Malayalam Ltd is looking to make its first overseas foray by taking a rubber plantation in Ghana on a long-term lease for Rs 300 crore.
The company said it would take a call on the tea business within a year if it failed to turn profitable.
“For rubber, we are looking at Ghana. We have done a couple of rounds of recce. Those countries make technically specified rubber, which is a mass market product meant for the tyre industry. The viable economic size we are looking at will be 4,000-5,000 hectares. It will be leased from the government there. We are looking at about Rs 300 crore investment in clearing, planting and setting up our initial manufacturing unit,” executive director N. Dharmaraj said.
He was speaking on the sidelines of a tea conclave organised by the Indian Chamber of Commerce.
A 4,000-hectare plantation can yield 1,800 kg rubber per hectare after reaching maturity, which takes six years.
“In tea, we need to stabilise our internal business. We have issues with our tea business internally. We have six tea estates, one in Tamil Nadu and the rest in Kerala. Margins are under pressure because of very high wage and input costs. The basic issue is that south Indian tea sells a good Rs 50 lower than north Indian levels. Though prices are good at the moment, but margins are always under pressure. We will need to figure out how to raise that quality gap. It is all about product differentiation that we are trying and how to maximise their recovery,” Dharmaraj said.
He said Harrisons, which produces about 7 million kg tea, will focus on increasing the output of the orthodox variety to 80 per cent from 60 per cent per year. Last year, total revenues stood at around Rs 300 crore with tea contributing Rs 70 crore.
On whether the firm will consider hiving off the tea division, Dharmaraj said, “It is too early to say. We are hopeful our efforts will pay off. The next one year will be crucial. We will take a call in a year. We are making some changes in manufacturing to increase recovery. We have definite plans on grade and product differentiation. We want to make decent returns and get into a situation where we get Rs 10 per kg as additional margins. We have 3,000 hectares of tea plantation,” he said.
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