Andrew Yule & Co Ltd is weighing the possibility of reducing its exposure in tea growing and marketing as margins in the business have been under pressure for some time.
Though Andrew Yule managing director Arindam Mukherjee declined to comment, sources said the company, to reduce its exposure in the troubled tea industry, will initially dispose of the estates mortgaged to the Unit Trust of India.
Andrew Yule had availed of advances against two tea estates -- Banarhat and Karballa -- to meet short-term fund requirements.
Andrew Yule has also reportedly entered into talks with Tata Tea for a possible sale of some other gardens owned by it, although no official confirmation was received.
Andrew Yule has 12 tea gardens -- seven in Assam, four in Dooars and one in Darjeeling. Of this, the gardens at Choonabhutti in Dooars and Murphulani in Assam are the laggards.
The process of the sale of the tea gardens will be initiated in next fiscal, said sources close to the development.
Next on the list after the two is the Mim Tea Estate in Darjeeling, where production has been traditionally low. This garden has, however, been retained by the company so long as Darjeeling tea has a special niche market and finds ready buyers.
The Department of Disinvestment has taken a decision to privatise Andrew Yule and its subsidiaries and induct private sector investors.
As it may be easier to sell a focussed company than a diversified one, by selling off tea gardens, Andrew Yule would become more focussed. The department then find it easier to fix the right valuation for the company and find a buyer.
The company's tea production registered a fall in the last and current fiscal. While the planted capacity of the gardens is around 96 lakh tonne per year, the company recorded a seven lakh tonne shortfall in tea production last year.
The figure for the current year till date was additionally down by another nine lakh tonne, and the total shortfall at the end of the fiscal was expected to stand at 16 lakh tonne, said sources.
Tea industry sources said Andrew Yule registered abnormal shortfall of tea production compared to other gardens in the respective areas.
Andrew Yule has three divisions -- tea, engineering and electrical equipment. The last division, which makes transformers and switchgear, was located at Perungudi in Chennai.
Performance of the three divisions was unsatisfactory in 2000-01 with Andrew Yule reporting a Rs 26.8 crore post-tax loss against a Rs 1.56 crore post-tax profit in 1999-2000. Andrew Yule's accumulated loss as on March 31, 2001, was Rs 33 crore.
The losses were attributed to a slowdown in industrial production, acute working capital shortage, increased overhead cost and reduced margin due to competition.
