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The tea industry in India is about 172 years old. It occupies an important
place and plays a very useful part in the national economy. The industry
combines both agriculture and industry.
Tea plantations in India are mainly located in rural hills and backward
areas of North-eastern and Southern States. Major tea growing areas of the
country are concentrated in Assam, West Bengal, Tamil Nadu and Kerala. The
other areas where tea is grown to a small extent are Karnataka, Tripura,
Himachal Pradesh, Uttaranchal, Arunachal Pradesh, Manipur, Sikkim,
Nagaland, Meghalaya, Mizoram, and Bihar. The competitors to India in tea
export are Sri Lanka, Kenya, China, Indonesia and Vietnam.
There are basically two types of tea sales in India - through Auctions
and Private Sales, also called as ex- garden sales. In Auction sales, tea is
auctioned at auction centers through brokers to buyers who either sell it to
wholesalers / retailers or export to overseas markets.
Tea is generally placed in the restricted category of the EXIM policy.
Through special Import License tea can be imported by paying import duty.
Since August 1998, tea is being freely imported from the SAARC countries.
Under the EQU / EPZ units tea can be imported for re exports after value
addition.
The tea plantation industry is strictly guided by various statutory Orders
through the Acts of Parliament like - Tea Act, Essential Commodities Act,
Plantation Labour Act, Factories Act, PFA Act, Standards of Weights and
Measures act etc.
Quality control strictly conforms to IS 9723 and Prevention of Food &
Adulteration Act (PFA). Disposal of tea waste is done through the tea waste
control of 1959. Many gardens are now taking quality certifications under ISO
9002:
Some statistical facts about the Indian Tea Industry:
The total turnover of the industry is around Rs. 10,000 crores.
Since independence, tea production has grown over 2505, while land
area has grown by 60%.
Total net foreign exchange earned per annum is around Rs.1847 crores.
Industry is labour intensive and employs over 1.1 million workers and
generates income for 10 million people indirectly. Women constitute
40% of the workforce.
802 M.Kgs or about 82% of total production of 981 M.Kgs of tea went
for domestic consumption.
RECENT DEVELOPMENTS
Inspite of its importance, tea industry of India is going through a crisis
phase since 1990s. The industry has witnessed many structural changes during
recent years, which include emergence of small tea growers in place of large
plantation and introduction of bought leaf factories (BLF). The present crisis
has led to the closure of many tea estates (e.g., 20 estates in Kerala, 30 in West
Bengal, about 70 in Assam have close down since the late 1990s). In early
2005 the tea industry witnessed major companies withdrawing from production
and concentrating on the packaging/ retailing sector (e.g. Tata. Tea, HLL etc in
India).
In the market, the rising competition at domestic as well as international
front has deepened the crisis of tea industry of India. .
Shift in the composition of demand for tea in the importing countries has
had unfavorable effects on export earnings from tea in India. The international
market price of tea has declined from US $ 2.09 to US $ 2.03 per kg in between
2005 and 2006. Though countries like Sri Lanka, Kenya and Indonesia are
growing fast in their export and higher price realization, during the same
period. Export of tea from India to some of the major importing countries like
Russia, UK, and USA are showing a sharp decline.
Although, per capita consumption of tea in India is amongst the lowest
(64 grams), but in volume terms India is the largest consumer. Since 1970,
India has become the largest absolute consumer of tea after UK.
Larger
domestic demand has given a new direction to the tea industry in the recent
years.
marketing
activities
to
individual
countrys
demand,
propagating health benefits of tea and promotion of organic tea using the
tea mark. This is exactly what the domestic tea companies should do for
their long term survival.
4
Price Trend
Recently tea prices showed bouyancy, which started from 2006, after
depressed prices for almost a decade since 1999.A slump in global output,
decline in production due to poor monsoon rains, steady increase in domestic
demand, range-bound export volumes and low growth in production further
drove prices upwards in 2012.
However Indias tea production had picked up in the last quarter of 2012
and initial signs are pointing to better weather in 2010, signalling a possible
change in the price trend. Even if prices do not retrace too much, producers
may have to live with subdued prices during the year. It does appear that the
two-year run of rising tea prices is losing steam.
2001
2008
2002
2009
2003
2010
2004
2011
2005
2012
2006
2007
200
200
200
200
200
200
201
201
2013
PRODUCTION
4
854
5
838
6
878
7
893
8
946
9
982
0
945
2
981
696.7
802
*
828(E
(million Kg)
CONSUMPTION
673
693
714
735
757
771
786
(million kg)
Exports
Exports play a vital role in maintaining the overall demand-supply
balance in the domestic market. Healthy export realisation is also crucial for
domestic realisations as un-remunerative prices in the export market may lead
to exporters dumping the produce in the domestic market, which in turn would
exert a downward pressure on domestic prices. Tea exports from India have
remained range bound over the period 1997-2011 with some year-to-year
fluctuations seen in between.
Export of Tea from India
YEAR
QUANTITY
Value
(Million Kg)
(Rs. Crores)
2011
199.05
1830.98
2012
218.73
2006.53
2010
178.75
1810.11
2011
203.12
2392.91
2012
131.2
1777.04
*Export from January to September
QUANTITY
2009-
2010-
2011-
2012-
Demand-Supply Gap
For the Indian tea industry, the main driver of demand is the domestic
market, with domestic consumption now growing at an estimated 3.5%
annually, as against around 2.5% a decade earlier. At the current growth rate,
the domestic market would require an incremental 30 Mkg or so annually,
going forward.
As against that, tea supply has been growing at less than 2% p.a because
it is difficult to improve garden yield of tea even during favourable climatic
conditions, and new plantations need a long gestation period of at least 4-5
years. Therefore the demand-supply gap in India is likely to persist at least over
the medium term.
INDUSTRY OUTLOOK:
10
The tea industry has every reason to look ahead in 2010 with great deal
of optimism and confidence, according to the Tea Market Annual Report
published by J Thomas and Company Private Limited, the world's oldest and
largest tea auctioneers.
With virtually no carry forward stock, and growing domestic demand to
act as buffer against the uncertainties of the global tea trade, price levels are
expected to remain attractive, the report observes.
Early cropping patterns indicate that demand supply equation is likely to
be more balance in 2010. Both Kenya and Sri Lanka production is expected to
exceed that of 2012 and indications are that the March crop in North India will
be higher than that of the last year following some much needed rainfall.
While the supply situation may be more comfortable than the previous
season, it is likely to be absorbed by the domestic market where quality
produce will continue to be in great demand, the reports states.
Exports
Indian exports at the end of 2012 stood at 191.5 million kg, compared to
203.1 million kg in 2011, a decline of 11.6 million kgs. The strong domestic
demand ensured that the exporters were often out priced, particularly in first
three quarters.
Lower orthodox production in North India was also another factor
contributing to the decline in exports. As a result, exports out of North India at
98.8 million kg recorded a decline of 17.4 million kg while exports out of
South India at 92.7 million kg recorded a rise of 5.8 million kg. The per unit
value increased from Rs 117.81 in 2011 to Rs 136.64 in 2012, a gain of Rs
18.83.
Exports to Iraq saw a significant increase during the year with an
additional 11.1 million kgs over 2011. Shipments to Russia grew by 4.2 million
11
12
COMPANY OVERVIEW
Jayshree Tea & Industries Limited
Incorporated as Jay Shree Tea Gardens in Oct.'45 with two tea estates,
the company changed its name to Jay Shree Tea and Industries (JSTI) in 1960.
It was promoted by B K Birla.
Started with an initial paid-up share capital of Rs 7.86 lac, it was raised
to Rs 39.05 lac in 1947 and thereafter only a rights equity issue was made
during 1960 in the ratio 1:5.
The company manages around 12 tea gardens in Assam, West Bengal,
Tamilnadu and Kerala. It has diversified over the years and manufactures
plywood in Andamans and superphosphates and sulphuric acid in West Bengal;
and has interest in shipping, real estate development, tubes and tyres. The
company is packing its tea from different tea estates, in polypouches and it is
sold under brand names -- Sadabahar, Shaandar and Sangam.
JSTI also acquired Maitrayee Tea Project at Chopra near Islampur with
192 acres under tea plantation to increase its presence in the area.
During 1999-2000, the company established a new factory named
'Aryaman Tea Estate' in Jalpaiguri Dist, which has commenced production
from Sep, 1999. The factory has the capacity of 7 lac kgs made tea per annum.
In June 2000, the B K Birla group's shareholding in Jay Shree Tea & Industries
has gone up to 44.61% from 40.15% following the completion of the
company's buy back offer for 12.30 lakh equity shares.
The company bought back 12.30 lac equity shares of Rs.10/- each at a
price of Rs.120/-per share in 2001-02 and subsequently the total Share Capital
as on March 2002 was Rs.10.67 crores. The tea processing factory which is
being set up at Ledo,Assam has commenced its commercial production with a
annual capacity of around 6 lac kg.
13
As the Supreme Court has banned the falling of trees in Andaman &
Nicobar Islands,the company's Plywood Operation is still under suspension.
The 100% subsidiary company viz Shiva's Group Ltd was amalgamated with
the company with the prior approval from the shareholders w.e.f 25.02.2002.
It also proposes to set up an International Outsourced Call centre at
Kolkata. The company is proposing to delist its equity shares from Delhi Stock
exchange as there is no transactions.
On BSE, as on 22 April 2012:
3.01
3312.63
6.45
EPS (Rs.)
63.72
20
163258
14
No of
No of
% of
September 2012 )
Promoter
ShareHolders
Shares
Share
Indian Promoter
14
4498169
40.25
3685170
Total Promoter
Non Promoter
14
4498169
40.25
3685170
12
717585
6.42
716185
FI/Bank/Insurance
31
381238
3.41
FII
200000
1.79
200000
Other
Total Institutions
0
46
200000
1298823
1.79
11.62
200000
1271276
Bodies Corporate
821
1655678
14.82
1609689
NRIs/OCBs
Others
82
9658
42605
3679064
0.38
32.92
40195
2699777
Total Non-Institution
10561
5377347
48.12
4349661
10607
6676170
59.75
5620937
Grand Total
10621
11174339
100
9306107
Demat
Institutions
Non-Institution
15
Creditors
Investors
Shareholders
There are various parameters upon which various types of different analysis is
done. They include:
1.
Liquidity Analysis.
2.
Profitability Analysis.
3.
Solvency Analysis.
16
4.
Efficiency Analysis.
LIQUIDITY RATIOS
Liquidity is the ability to convert assets into cash or to obtain cash. It is
important from the point of view of meeting the firms short term obligations.
Current Ratio
It is the ratio of the current assets to current liabilities of the company. It
is calculated to test the short term solvency of a business and its ability to meet
its short term commitments. Besides measuring liquidity, it also measures the
margin of safety available in case of uncertainty of flow of funds.
It provides a measure of degree to which current assets cover current
liabilities. The excess of current assets over current liabilities provides a
measure of safety margin available against uncertainty in realization of current
assets and flow of funds.
Quick ratio
An
indicator
of
company's
short-term
liquidity. The
quick
ratio measures a company's ability to meet its short-term obligations with its
most liquid assets. The higher the quick ratio, the better the position of
the company.
Quick Ratio= (Cash + Marketable securities + accounts receivable) /
Current Liabilities
Liquidity Ratios
17
1.76
0.71
3.61
0.94
18
PROFITABILITY RATIOS
Profitability ratios are probably the most important ratios studied by any
analyst. They are able to give a good overall picture of a company with respect
to its peers. The most important objectives for the business and, arguably
therefore, the most important ratios, are those concerned with profitability.
Net profit margin
Net profit margin divided by net revenues, often expressed as a
percentage. This number is an indication of how effective a company is at cost
control. The higher the net profit margin is, the more effective the company is
at converting revenue into actual profit. The net profit margin is a good way of
comparing companies in the same industry, since such companies are generally
subject to similar business conditions. However, the net profit margins are also
a good way to to compare companies in different industries in order to gauge
which industries are relatively more profitable. also called net margin
Net Profit
Margin
Net Profit
Turnover
19
Mar-12
0.055
0.011
0.042
0.014
0.003
0.016
Analysis
Net Profit Margin:
The Profit Margin of a company determines its ability to withstand
competition and adverse conditions like rising costs, falling prices or declining
sales in the future. The ratio measures the percentage of profits earned per
dollar of sales and thus is a measure of efficiency of the company
Return on Assets:
The Return on Assets of a company determines its ability to utitize the
Assets employed in the company efficiently and effectively to earn a good
return. The ratio measures the percentage of profits earned per dollar of Asset
and thus is a measure of efficiency of the company in generating profits on its
Assets.
LEVERAGE RATIOS
These ratios determine the financial leverage enjoyed by the firm and
also look at the short term solvency of the firm in terms of its interest paying
capacity. Long Term Debt / Equity ratios provide insight into the extent to
which nonequity capital is used to finance the assets of the firm.
Ratio = long term liabilities/ shareholders equity
The higher is the ratio, the higher the proportion of assets financed by nonshareholder parties. Which components to include in the numerator or
20
Mar-12
0.581
0.482
0.929
2.516
0.529
0.481
0.926
2.953
ANALYSIS:
Jay Shree Limited would fall on the higher end.
TURNOVER RATIOS
Fixed asset turnover is the ratio of sales (on the Profit and loss account)
to the value of fixed assets (on the balance sheet). It indicates how well the
business is using its fixed assets to generate sales.
Generally speaking, the higher the ratio, the better, because a high ratio
indicates the business has less money tied up in fixed assets for each dollar of
sales revenue. A declining ratio may indicate that the business is over-invested
in plant, equipment, or other fixed assets.
21
Efficiency Ratio
Cash Turnover
Total Assets Turnover
Accounts Receivable
Mar-12
143.48
0.98
10.49
0.73
6.09
9.5
Turnover
Analysis:
This ratio is least in case of Jay Shree Tea which is also below the
industry average; this inefficiency increases the chance of default by the
debtors.
CROSS SECTIONAL ANALYSIS
In this analysis, the different financial variables of different companies
have been compared over a period of time of two years viz. 2006-2007 and
2007-2011. As such, it helps us to get some sort of trend of various financial
factors in the financial statements of a company.
22
Year
Share Capital
Reserves & Surplus
Net Worth
Secured Loans
Unsecured Loans
Total Debt
Total Liabilities
Gross Block
Less: Accum. Depreciation
Net Block
Capital Work in Progress
Investments
Current Assets, Loans & Advances
Inventories
Sundry Debtors
Cash and Bank Balance
Loans and Advances
Less: Current Liab. & Prov.
Current Liabilities
Provisions
Net Current Assets
Miscellaneous Expenses not w/o
Total Assets
3.47
48.29
51.83
41.19
6.98
48.17
100
76.49
26.76
49.74
48.45
51.92
39.63
8.45
48.08
100
72.69
25.72
46.97
0.84
31.91
0.64
30.77
16.09
21.59
12.17
9.15
0.92
11.3
8.28
8.84
21.9
7.71
20.29
8.2
7.01
23.23
0
100
0
100
Analysis
JayShree Tea the inventory as a percentage of total assets is highest among all
the companies which shows cautious and conservative approach.
23
Mar-11
Mar-12
INCOME :
Sales Turnover
Excise Duty
Other Income
Stock Adjustments
Total Income
EXPENDITURE :
100
1.67
3.95
3.8
106.07
100
2.25
8.4
-0.67
105.48
Raw Materials
Power & Fuel Cost
Other Mfgr Expenses
Employee Cost
Selling & Admn Expenses
Miscellaneous Expenses
PBDIT
44.73
5.79
22.76
7.45
7.27
8.41
9.65
32.3
7.52
30.76
9.28
10.22
5.31
10.1
3.84
3.42
Depreciation
Profit Before Tax
Tax
Fringe benefit tax
Deferred Tax
Extra ordinary items
Profit after tax
1.6
4.21
0.02
0
0.9
-0.83
4.12
2.53
4.14
0.22
0
-0.26
2.6
1.58
Analysis
The 2011-12 and lowest for Jay Shree Ltd.
Trend Analysis
This is a time series analysis whereby a study is done in order to
interpret what has changed in the company over a year. This can be done by
comparing the balance sheet and profit and loss statement of the company for
two years.
Balance Sheet
24
25
0.047
0.022
0.024
0.066
-0.153
0.028
0.026
0.079
0.067
0.086
0.352
0.064
0.356
1.421
-0.887
0.312
1.74
0.128
-0.104
0.026
Income Statement
Jayshree Tea Limited
INCOME :
Sales Turnover
Excise Duty
Other Income
Stock Adjustments
Total Income
EXPENDITURE :
Raw Materials
Power & Fuel Cost
Employee Cost
Other Manufacturing Expenses
Selling and Administration Expenses
Miscellaneous Expenses
Operating Profit
Interest
Depreciation
Profit Before Tax
Tax
Fringe Benefit tax
Deferred Tax
Extraordinary Items
Adjusted Net Profit
SEGMENT REPORTING:
54.197
14.797
-27.502
-970.652
55.066
113.514
18.823
14.123
23.789
9.696
144.521
47.447
73.048
-2.453
56.84
-83.333
-626.389
-149.157
301.386
Information about
27
(A)
Segment wise Information for the year ended 31st March, 2012
PRIMARY SEGMENT
1 Segment Revenue (Net
31.03.2012
Sales/Income from each segment)
Tea
2,81,10,82
Chemicals & Fertilisers
1,36,14,19
Infotech
Others
2,81,60
Less : Inter-segmental Revenue
86,95
Total
4,19,19,66
2 Segment Results {Profit / (Loss)
before Tax & Interest}
a) Tea
42,37,65
b) Chemicals & Fertilisers
(3,11,92)
c) Infotech
d) Others
1,00,96
Total
40,26,69
Less : Interest (Net)
10,37,51
Add : Unallocable Income net of
(13,23,10)
unallocable expenditure
Total Profit / (Loss)
16,66,08
before Tax
3 Segment Assets (Including revaluation reserve) &
Segment Liabilities
Assets
Liabilities Assets
a) Tea
1,92,35,75
31,24,60
1,60,57,59
b) Chemicals & Fertilisers
67,70,27
49,62,14
33,59,88
c) Infotech
4,85,07
d) Others
1,19,39
61,69
1,11,12
e) Unallocable
1,56,59,35
21,19,87
1,60,16,83
Total
4,17,84,76
1,02,68,30
3,60,30,49
Capital Exp.
(B
(Rs. in 000)
31.03.2011
2,03,99,41
65,92,61
1,03,05
2,40,97
64,46
2,72,71,58
5,73,95
5,86,30
(1,11,09)
60,81
11,09,97
7,54,31
6,38,87
9,94,53
Liabilities
29,86,39
9,56,23
48,44
57,35
11,87,07
52,35,48
Capital Exp.
a) Tea
b) Chemicals &
Depreciation
Depreciation
10,93,78
5,55,58 11,71,28
5,61,38
41,17
50,90
45,80
48,67
Fertilisers
c) Infotech
d) Others
e) Unallocable
Total
5,35
2,80,31
14,20,61
Secondary Segment
1,67
73,58
6,81,73
13,01
1,31,26
13,61,3
49,09
1,31
67,28
7,27,73
Domestic
5
Export
Total
3,50,22,55
68,97,11
4,19,19,66
)
Segment Revenue
28
(2,18,57,18)
(54,14,40) (2,72,71,58
)
Segment Assets
4,14,39,13
(3,56,76,72)
3,45,63 4,17,84,76
(3,53,77) (3,60,30,49
)
Capital Expenditure
Note
14,20,61
(13,61,35)
()
14,20,61
(13,61,35)
CONCLUSION
Though there has been a recovery in the prices of tea and exports have
also started looking up, with the emerging trends in the globalized economy,
markets can no longer be protected. The high cost of production is still a matter
of concern for the Indian tea industry. The Indian tea industry would have to
gear itself up to counter the new forces unleashed by globalization.
Budget 2011-12 gave the extension of concessional import duty on
imported plantation machinery, like tea bagging machines, till March 31, 2012
will help the industry in value adding and hiking exports in the long run.
Oversupply of tea and less demand has contributed to market imbalance
in India. Strategies have to be devised to improve the demand side, as so much
effort has been put in improving supply efficiency in the past.
Only financially sound tea producers would perhaps be able to take the
risk of delayed marketing and avail any possible opportunity arising out of
future upward price movement in the market.
29
REFERENCES
Jay Shree tea & Industries Ltd. Annual Report 11-12
www.money.livemint.com
www.bseindia..com
www.moneycontrol.com
www.capitaline.com
30