Tea Sector Stares financial crisis

                                            Crisis in  Tea Sector 

With limited funds available for daily operations, the financial crisis in the tea sector is deepening with several companies putting up their estates for sale. This is despite tea prices improving marginally last year with projections of a good opening this year once auctions re-commence.

After McLeod Russel and two other tea majors – Warren Tea and Jay Shree Tea & Industries - announced sales of estates to pare debts and bring in financial prudence, Apeejay Tea also underwent an insolvency trial before NCLAT quashed the proceedings against the tea producer. 

Assam Company, on the other hand, underwent a change of hands via the insolvency route.The root of the problem, according to industry officials, is the sudden stoppage of lines of credit to tea plantation companies, which has severely impacted their cash flows.

“After banks pulled off their lines of credit, many plantation companies are struggling now. This has impacted the cash flow in the company and some of the plantations are not in a position to keep up with their financial commitments”, Razi Khan, director of sales and marketing at Appejay Tea, said.

Ratings agencies had downgraded the ratings for various tea companies, which sources said, had influenced the flow of credit to tea firms.

For example, ICRA downgraded term loans and fund-based working capital limit from BB+ with a stable outlook to BBB with a negative outlook for Warren Tea, while it downgraded term loans of Jay Shree from BBB+ with a stable outlook to BBB with a negative outlook.