Khaitan: Far and wide

Calcutta, Nov. 6: McLeod Russel India Limited (MRIL) is planning to buy gardens in Kenya and Assam to become a 100-million-kg company in the next two years.

McLeod is one of the largest tea companies of the world with a produce of 70 million kg a year.

“A part of the Rs 118.88 crore received from the qualified institutional placement would be used to acquire new gardens. We are looking at properties in Assam and Kenya,” said Aditya Khaitan, managing director of MRIL.

Kenya is a market McLeod would like to focus on as most of the company’s tea buyers also operate in the Kenyan market.

McLeod Russel is the first Indian tea company that is planning to buy gardens in Kenya. The company expects tea prices for this fiscal to rise by Rs 9 to Rs 10 per kg on a yearly average.

The company has 23 estates in Assam and five in Dooars in Bengal. About 85 per cent of MRIL's production is from Assam.

Magors have gardens in Kenya but due to political conditions and ownership clauses had been hesitant to acquire them. Khaitan noted that all such conditions would be studied in detail before making a final decision.

“Lower carry-forward tea in 2006, stagnant production, estimated consumption growth of 3 per cent and higher exports in 2006 should result in further firming of prices post October,” Khaitan added.

The Doom Dooma Tea Company (DDTCL), which was acquired from HLL in January 2006, had a production of 6.5 million kg last year.

The net realisation from the gardens in the Assam belt (post acquisition in the first six months of the new season) has gone up to Rs 80 per kg on an average and this quick turn-around is expected to continue at Rs 78 per kg in the current year.

For the acquisition of Williamson Tea, MRIL had borrowed Rs 180 crore from ICICI Bank. To buy out Doom Dooma gardens from HLL, it borrowed Rs 18 crore from IL&FS.