McLeod Russel eyes buys in India and Africa

McLeod Russel, of the B M Khaitan group, has made cash accretion of Rs 260 crore in 2009-10 riding on higher tea commodity prices.

The tea major has reduced debt by Rs 135 crore during FY10 from a high of Rs 415 crore in the beginning of FY09.

While the company is scouting for acquisitions in India and Africa, it is also planning to increase its crop production in Assam, Vietnam and Uganda this year.

Aditya Khaitan, managing director, McLeod Russel said, “The selling price of tea for us in 2009-10 was Rs 137.25 per kg compared to Rs 111.03 per kg the previous year. The operating profit increased by 76% to Rs 363.32 crore, while standalone net profit stood at Rs 240.33 crore in 2009-10.”

According to Khaitan, the net profit margin stood at 24% in FY09, which increased from 11% the previous year and expects to maintain this in the current year.

“In the current year, if we do not go in for an acquisition, we should be able to reduce our debt by another Rs 150-170 crore. On the production side, by the close of the fiscal, we would cross the 100 million kg mark, with 80 million kg production in Assam, 5.5 million kg in Vietnam and 16 million kg in Uganda,” he said.

On a broad horizon of five years, Khaitan said, “Although we are the largest, we are only 4% of the global black tea market, which is at 2 billion kgs. We would like to scale up the production of 160-180 million kg in the next five years. Also on the turnover front, we aspire to have a turnover of around Rs 3,000 crore perhaps.”

About prices, Khaitan felt that they should remain firm, in fact, higher by Rs 10-15 per kg in the current year. “I presume that North India would not go ahead in production and we are thus not anticipating a huge surge in crop,” he said.

The company plans to exports 29 million kg this year apart from exporting the entire Vietnam and Ugandan produce this year.