UNITED NILGIRI TEA ESTATES & COMPANY

Household name for all that’s tea

Nestled 6,000 to 8,000 feet up in the pristine Blue Mountains (the Nilgiris) of southern India are the Allada, Korakundah, Devabetta and Chamraj tea estates of the United Nilgiri Tea Estates & Company Limited (UNITEA), which have been producing the finest of teas to invigorate discerning tea drinkers around the world since 1922.

UNITEA has the rare distinction of exporting teas since 1984 onwards. It has gone from strength to strength, from regular teas to valueadded teas, and now to organic teas – of which it is the pioneer in India. Unique teas like Frost Tea and Golden Tips are very much part of its repertoire.

UNITEA is engaged in the growing and manufacturing of tea, as well as letting out of property.

Though the company has grown slowly and gradually on the financial front, it has continuously remained on the growth path. During the last 12 years, its sales turnover has more than doubled from Rs 37 crore in fiscal 2013 to Rs 84 crore in fiscal 2024, with operating profit doubling from Rs 8 crore to Rs 16 crore and the net profit spurting two and a half times from Rs 6 crore to Rs 16 crore. What is more, its performance will be much better going ahead. Consider:

CANISTER TEA

The company manufactures a large variety of teas in both bulk and packet forms, including special tea, black tea, white tea, herbal tea and gift tea. Under special teas, it offers Chamraj Frost tea in canisters. Its black tea includes Chamraj Single Estate pure orthodox tea in canisters, Chamraj Pyramid tea, Chamraj Rare Teas – Chestler pack, Chamraj single estate dip bags, Chamraj Master blend and Korakundah Organic Single Estate black tea. In the green tea and herbal tea segments also, there are many varieties. With these multiple products, the company satisfies a wide variety of tea aficionados at home as well as abroad.

• The company’s teas are well received in overseas markets also. In fact, it has the rare distinction of exporting teas since 1984. Today the company exports its products to Australia, Congo, Canada, Germany, the Netherlands, Denmark, Finland, Japan, the United States and the United Kingdom. It has scaled up production of high value teas -- both organic and conventional -- with a better focus on high value grades and introduction of new buyers in the export and domestic markets. The Centre’s drive to check pesticides in tea to improve its quality is helping exporters seeking higher demand for the brew in overseas markets, especially Iran and Iraq. According to the latest Tea Board data, India’s tea exports in the first three months of calendar year 2024 saw a 33.29% yoy increase in volume at 64.63 million kg. North and South India exported 37.79 million kg and 26.84 million kg, which were 19.59% and 58.91% higher respectively yoy.

PRICES FIRM

• The Indian tea market has turned buoyant of late on account of the reduced crop, which is turn is attributed to heat waves and floods in south India. As a result, tea prices have firmed up by at least 25 per cent. If the current market situation is any guide, the firm trend is likely to continue for the time being, thus pushing up the topline as well as bottomline of the company.
• The company’s financial position is very strong, with reserves at the end of March 2024 standing at Rs 200 crore – almost 40 times its tiny equity capital of Rs 5 crore. It is a totally debt-free company and on the other hand has surplus cash, while its earnings and dividends have been growing In FY 2025, we expect the company to register EPS of Rs 39.1, which is likely to rise to Rs 49.4 in FY 2026. The scrip trades at Rs 401. P/E on FY 2026 EPS works out to 8.1.

PERFORMANCE INDICATORS (Rs. in crore)

HARRISONS MALAYALAM

Leading player in tea & rubber

Harrisons Malayalam, a member of the $ 4.8 billion RPG group, is one of the most successful agriculture operations in south India, having tea and rubber estates in Kerala and Tamil Nadu. One of the oldest such companies, with a history that goes back over a 150 years, it has been a pioneer in corporate farming and has over this period established and run plantations for tea, rubber, cocoa, coffee and a variety of spices. The company cultivates around 14,000 hectares (ha) and processes produce from other farmers in its neighbourhood. Its primary products are tea, rubber and pineapple which are cultivated over 74,000 ha, 6,000 ha, and 1,000 ha respectively. It produces approximately 9,000 tonnes of rubber, 20,000 tonnes of tea and 25,000 tonnes of pineapple.

The company also produces smaller quantities of other exotic horticultural crops such as arecanut, banana, cardamom, cocoa, coffee, coconut, pepper and vanilla, as well as limited quantities of organic tea and spices. Its operations are spread over 20 estates, eight rubber factories and 12 tea factories, along with several blending and processing units.

As it happens, the company’s performance on the financial front has not been so good. During the last 12 years, its sales turnover has moved up very slowly – from Rs 346 crore in fiscal 2013 to Rs 488 crore in fiscal 2024. On the other hand, its operating profit has, after moving up from Rs 22 crore in fiscal 2013 to Rs 55 crore in fiscal 2021, steadily declined to Rs 27 crore in fiscal 2023, and further to Rs 10 crore in fiscal 2024. Likewise, its net profit, which shot up from Rs 2 crore in fiscal 2013 to Rs 40 crore in fiscal 2021, went into the red with a loss of Rs 7 crore in fiscal 2024. However, prospects for the company going ahead are highly encouraging. Consider:

• Indian tea prices have been firming up. During the last one year, there has been a spurt of over 25 per cent in tea prices as tea crops and production have gone down on account of erratic rains, heat waves in some tea-producing areas and floods in some other areas. The firm trend in tea prices is expected to continue for some more time. This is bound to push up the company’s topline as well as bottomline, going ahead.

EXPORT DEMAND

• Besides the spurt in tea prices in the domestic market, there has been an upward trend in the rise in tea prices abroad, while export demand is also picking up in the wake of the government’s drive to check pesticides in tea in order to improve the quality of Indian tea. This campaign has led to an increase in demand, particularly from Iran and Iraq. According to the latest Tea Board data, India’s tea exports during the first quarter of the current year have shot up by 33.29 per cent in terms of volume, clocking around 65 million kg. As Harrisons Malayalam is a leading exporter of tea, this trend will strengthen the company’s balance sheet.
• The company’s other major product is rubber, and with the government’s policy boost for infrastructure development, demand for rubber is bound to shoot up. At the same time, the automobile industry in India is in fine fettle and this has given a big boost to demand for tyres and in turn for rubber. According to experts, demand for rubber will improve considerably going ahead, on account of demand across a spectrum of end-use industries.
• The company remains confident in its ability to maintain a strong market position that’s supported by its well-established brand image cultivated over the years, exceptional service capabilities, and a diverse portfolio of high-quality products. In FY 2025, we expect the company to register EPS of Rs 13.6, which is likely to rise to Rs 22.5 in FY 2026. The scrip trades at Rs 236. P/E on the FY 2026 EPS works out to 10.5.

PERFORMANCE INDICATORS (Rs. in crore)