Shortages trigger fresh interest in tea scrips
Surekha Sule
Driven by a fresh bout of shortage and firming prices, investors have taken to tea scrips once again. For Indian tea majors, the favourable situation started brewing six months back with the news of India's major competitors Kenya and Sri Lanka reporting lower production. While worldwide tea prices started shooting up, its prices at home too went on firming, on expectations of a shortfall of 10-15 million kg in the domestic market.As a result and with a general market boom in August 97, almost all the tea scrips flared up to scale their peaks -- Tata Tea at Rs 482, Jayshree Tea at Rs 230, Harrison Malayalam at Rs 60, George Williamson at Rs 160, Assam Co at Rs 72, Goodricke at Rs 122 and Warren Tea at Rs 168. With the stock market plunge, these scrips too reacted, shedding their gains substantially. Over the last one month, however, buying interest has revived in almost all tea scrips. Now there is a fresh bout of short supply, with North Indian tea supplies nearly coming to a halt during the extreme
winter conditions of Novemeber-December. With Kenya's production supposedly lower by 40 per cent as also a lower Sri Lankan tea supply to the world market, Indian tea will increasingly go out of the country leaving a shortfall. Besides, the revived tea exports to CIS and Iran would continue putting pressure on the domestic supplies. During 1997-98, India is expected to have a tea production of 805 million kg as against last year's 780 kg. This year tea exports shot up to 193 million kg from 153 million kg and this trend is likely to further accentuate, leaving a substantial shortfall back home despite higher production. The result: tea prices will keep going up both in the domestic as well as foreign market. All this augurs well with the tea producers with demand-supply situation rapidly changing in favour of the producers. ``Among all, Tata Tea is the best bet,'' says K Ramachandran, chief of research at Birla Marlin Securities. Tata Tea is substantially growing its tea requirement in the company's tea
estates. Thus the company does not have to buy at higher rate from the auctions like most others do. Besides, it has major brand presence in the domestic market and its exports (especially instant tea) are booming. Hence the company has a win-win situation with advantages of integrated operations and well entrenched brands, feels Ramachandran. There is all likelihood of sustained increase in realisation from tea both from domestic as well as foreign market. The Tata Tea scrip which gained more than 100 per cent betweeen May and August 1997, rising from a trough of Rs 224 to a peak of Rs 482, shed more than half this gain to touch Rs 330 in late November 1997. It has regained much of this loss over the last month piercing the Rs 400-mark last week to finish at Rs 407. All tea scrips have the same double-bag story and the subsequent loss followed by the current gains. Jayshree Tea skyrocketed from Rs 91 in late April 1997 to Rs 230 in early August 1997 to come down to Rs 192 by late November 1997; but
gaining only modestly to Rs 205 now. Warren Tea jumped from Rs 49 during end-April to Rs 168 by August and shed half of this to touch Rs 81 by November. It has now bounced back to Rs 114. Goodricke too balooned two-and-a-half times from Rs 51 to Rs 122 between April and August, 1997. After dipping to Rs 70 in November, it bounced back to Rs 96 on December 24. George Williamson shot up from Rs 71 in April to Rs 160 in August and fell to Rs 97 in Novemeber. Now it is moving up. However, Assam Company and Harrison Malayalam do not follow this trend. Assam Co took a three-fold jump from Rs 23 in May to Rs 72 in August and is still on the down-trend at Rs 49. Harrison Malayalam too which shot up from Rs 24 in May to Rs 60 in August went down to Rs 33 but has not gained much.For Assam Co, the lukewarm treatment owes to its troubled times making it revaluate its assets once again to shore up its sagging bottomline. For the RPG group company Harrison Malayalam, the reason for low rating is due to its rubber
plantation business which is taking a beating on account of falling natural rubber prices. The B K Birla's Jayshree Tea too had its disadvantages from non-tea businesses like plywood and granulated single superphosphate which have not done well and the company could somewhat maintain its performance due to good show from tea business.
Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.
|
