The Hindu Business Line : Andrew Yule's tea unit sees better days ahead with prices looking up

THE working capital starved Andrew Yule & Co. Ltd (AYCL), a Government of India enterprise, which has already received Rs 49 crore in two tranches (in October 2003 and January 2004) from the Government as part of the approved financial and business restructuring plan, expects to see better days for its Tea Division with a slight improvement in tea prices.

It is learnt that both the Government and the company were now working out the strategies and policies for full disinvestment of AYCL's stake in group companies like Hooghly Printing and Tide Water Oil.

The Central Government has sanctioned and released to AYCL, by way of budgetary support, financial assistance of Rs 92.64 crore during 2003-04 for meeting capital expenditure towards the implementation of certain plan schemes. The main stipulation is that the company has to issue fresh equity shares of face value of Rs 10 each at par equivalent to Rs 92.64 crore in the name of the President of India. The company has already applied to SEBI for the necessary approvals. The Government's holding in AYCL, after this, will touch 97.40 per cent from the existing 93.26 per cent.

Talking to Business Line after the company's AGM here today, Mr Arindom Mukherjee, Chairman and Managing Director, said there has been marked improvement in operations of the company from early this year after infusion of the Rs 49 crore. He was hopeful of soon receiving the Government's guarantee for a likely bond issue by the company for raising the urgently required funds, both for working capital needs and for settling employee dues. The revival package includes capital infusion through conversion of loans into equity, guarantee for a bond issue and disinvestment of AYCL's stake in group companies.

He said both the company and Government were also looking at various other alternatives. "Working capital finance will not come in unless we improve the balance sheet further," said Mr Mukherjee.

As per one of the resolutions at the AGM today, which has already received shareholder approval, the company is proposing to enhance the authorised capital to Rs 200 crore from the existing Rs 75 crore, in order to arrest the rapid depletion in the asset value of the company, and improve market credibility. The financial recast, according to Mr Mukherjee, necessitates an expanded equity base.

He sounded confident that if the revival package was fully implemented in 2004-05, then, coupled with improved price realisation from tea, and also boosted by the Rs 80-crore pending orders with the engineering and electrical divisions, AYCL might see better days ahead.

Narrating the woes of bulk tea producers, severely hit by declining exports and low auction prices, he said the consolidation process in tea for AYCL has already begun, and better results are expected in the first half of the current fiscal. He felt that the shortfall in tea output at around 40-45 million kg during January-July April this year and higher exports have actually helped prices.