GOODRICKE GROUP

Acquisitions to improve fortunes

The Goodricke group, part of UK-based Camellia Plc, is one of the largest producers of bulk tea in India and is primarily engaged in the business of cultivation, manufacturing and sale of tea. The company’s product categories include bulk teas and instant teas. It produces original and blended black, green and crush-tear-curl (CTC) teas, both in original and blended form. The company’s marketing channels used for bulk teas include the public auction system, private and consignment sales, exports and direct sales, either in original or blended form. Its instant tea products include instant black tea, instant Darjeeling tea, instant green tea and instant Oolong tea. It provides hot water soluble (HWS) and cold water soluble (CWS) instant tea. It operates approximately 18 tea estates spread across West Bengal and Assam and sells bulk tea both in the domestic and international markets. The company also produces instant tea at its plant located in Dooars, West Bengal, primarily for the international market.

However, the company’s financial performance is disappointing. During the last 13 years, its sales turnover has increased modestly from Rs 540 crore in fiscal 2012 to Rs 824 crore in fiscal 2024, but operating profit has seen a loss of Rs 49 crore in fiscal 2024 in striking contrast to a profit of Rs 36 crore in FY12, while at the net level it has suffered a huge loss of Rs 69 crore against a profit of Rs 20 crore. However, the outlook for the company going ahead is highly encouraging. Consider:

• In order to ramp up its production, the Goodricke group is looking to acquire two to three more estates in Assam. This will push up the company’s topline as well as bottomline.

PRICE FACTOR

• Of late, tea prices are rising due to a shortfall in tea production. Tea producers are likely to implement staggered price increases soon. This is in response to soaring procurement costs and dwindling stockpiles. The surge in tea prices stems from a sharp decline in production. The primary tea-growing regions of Assam and West Bengal have been particularly hard hit, leading to a spike in prices at auction centres.
• The monsoon ‘flush’ has also been affected this year, so auction prices are expected to remain high. (The term ‘flush’ refers to the season when tea leaves are harvested, with the monsoon flush generally considered inferior in quality compared to the summer harvest.) As procurement costs continue to rise, companies may have little choice but to increase prices.
• In October 2024, the tea industry got a Rs 664- crore push for modernisation, replanting and global expansion as the Union Ministry of Commerce and Industry approved an overall budget of Rs 664.09 crore for overall protection, growth and sustenance of the tea industry. Strengthening the tea industry through this holistic approach is expected to boost per capita consumption of tea domestically and contribute to better price realisation and an increase in India’s share in tea export markets
• To be released under the Tea Board’s ‘Tea Development & Promotion Scheme’, the major components of the scheme include plantation development and quality upgrading, tea promotion and market support, technological intervention, research and development, and welfare and capacity building measures. Large tea estates (over 10.12 hectares) will receive support for replanting efforts, while entrepreneurs, small tea growers and selfhelp groups (SHGs) can access assistance for establishing nurseries with recommended cultivars. In FY 2025, we expect the company to register an EPS of Rs 17.8, which is likely to rise to Rs 22.9 in FY 2026. The scrip trades at Rs 265. P/E on the FY 2026 EPS works out to 11.6.

PERFORMANCE INDICATORS (Rs. in crore)

RENAISSANCE GLOBAL

Stunning gems for marquee clients

Andheri (Mumbai)-headquartered Renaissance Global is a jewellery player engaged in designing, manufacturing and supplying branded jewellery across key high-potential markets in the US, Canada, the UK and Asia. For the past quartercentury, the company has been creating incredible jewellery designed for its marquee clients across the globe. Starting off as a retail supplier of private label fine jewellery to global retailers, the company has grown through both organic and inorganic initiatives to establish itself in the licensed brand jewellery space as well as the margin- accretive direct-to-customer (D2C) space. These growth verticals show immense potential to transform the company’s revenues and margin profile in the medium term, deploying lower capital for growth.

With the growing demand for the company’s products, Renaissance has made rapid strides on the financial front. During the last 12 years, its sales turnover has more than doubled – from Rs 952 crore in fiscal 2013 to Rs 2,107 crore in fiscal 2024, with operating profit spurting around four times from Rs 44 crore to Rs 164 crore and the profit at net level shooting up around five times – from Rs 15 crore to Rs 74 crore.

What is more, prospects for the company going ahead are all the more promising with established private label channels seeing a new wave of growth through OEM managements, with global fashion brands looking to geo-political concerns. Consider:

• Renaissance’s experience and expertise in design, manufacturing, distribution, marketing and cash-flow management provide it with a robust platform to chase these growth opportunities as global economies emerge out of uncertainty and inflationary headwinds.
• By now, Renaissance has emerged as a highly differentiated luxury lifestyle products company and it is a licencee for two renowned global brands – Hallmark and Disney.

DESIGN TALENT

• The company employs more than 150 designers with experience in global fashion trends across the US, the UK, Hong Kong and Dubai. With its investment in the latest technologies and human talent, the company has the ability to craft over 1,000 unique designs per month.
• Needless to say, the company can boast of a client list which includes the who’s who in the branded jewellery place. The company’s customers include speciality jewellery retailers like Meyer and Helzberg Diamonds, department store chains like JCPenny, Macy’s and Walmart, and catalogue e-commerce and television retailers like Amazon, Argos and Jewellery Television. Interestingly, its top 10 customers have been associated with it for more than 10 years and the company has maintained its relationships with more than 50 customers across the US, the UK and the Middle East. Today, the company’s licensed brand segment has partnerships with global iconic brands such as Enchanted Disney Fine Jewellery, Hallmark, NFL, Netflix, Star Wars and Disney Treasure. The company has exited the plain gold business based in Dubai, resulting in an overall inventory reduction of Rs 75 crore from the peak of February 2024. This transaction closed on August 1 of the current year and will be reflected in the next quarter’s financial results.

LAB GEMS

• The growing interest in lab-grown diamonds is reshaping the fine jewellery industry, and its D2C brands are at the forefront of this transformation by seamlessly blending luxury with affordability, given its strong emphasis on labgrown diamonds, which now account for 55% of its D2C business and prominently feature in its own brands and licensed brands. Rather than entering the increasingly competitive and price- sensitive field of lab-grown diamond manufacturing, the company has strategically focused on building brands that cater to this demand. Its online platform offers a diverse selection of high-quality lab-grown diamonds from numerous suppliers, supporting its goal of providing exceptional value in the luxury market. In FY 2025, we expect the company to register an EPS of Rs 8.9, which is likely to rise to Rs 11.2 in FY 2026. The scrip trades at Rs 120. P/E on th eFY 2026 EPS works out to 10.6.

PERFORMANCE INDICATORS (Rs. in crore)