McLeod may diversify to derisk plantation biz

World's largest bulk tea company McLeod Russel India Ltd is mulling to diversify its business to derisk its plantation business due to uncertain weather conditions and help them grow over the next decade.

"As a company we need to look at diversification. We have thrown the idea to a couple of consultants without telling them what we want. We want them to come up with ideas that are best fit for us," company's Managing Director Aditya Khaitan said today on the sidelines of the AGM.

"We are staying open minded and diversification can be on tea, agri-related or any other area. It will be crystallised only after the ideas of the consultants are debated," he said.

Khaitan said, "We have asked ourselves, what if something (adverse) happens to tea 20 years from now and what are the alternatives we should look into." 

He said over the last 10 years the company followed an acquisition-led growth to expand their present tea plantation business and had achieved substantially and now it was time to look for the growth story for the next decade.

Tea plantation industry has been experiencing erratic weather conditions over the last decade, Khaitan said, adding, after a very good season in 2013-14, dry weather conditions have come back to haunt the tea industry in the current financial year (2014-15) with the crop shortfall in North India pegged at 30 million kg during April-June and that could impact revenue and profitability.

Apart from diversifying into new business segments, McLeod is also planning to double its bought leaf production to 50 million kg over the next four years to maintain a stable production.

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