The Hindu Business Line : `We have planned to come out with 2nd public issue '

At present, we do not have any plan to enter the North Indian tea sector because this sector is facing several problems, says Mr B.P. Singh, Chairman of Beeyu Overseas.

Kolkata , Feb. 12

GOING by the standards set by the leading tea companies, Beeyu Overseas Ltd appears to be a small player. However, the importance of the company becomes apparent when it is known that it is only a decade old and runs, probably, the largest bought-leaf factory in the country.

Headquartered in the city, the company operates from Ooty. At present, the capacity of Beeyu's factory is 3,000 tonnes per annum. It is currently been expanded in two phases. In the first phase it will be expanded to 6,000 tonnes per annum and then to 9,000.

The company's first plantation of 48.15 acres, acquired in 1998, is situated at Doddabetta in the Nilgiris . In the initial years, the company was primarily an exporting firm. Both its CTC and orthodox manufacturing units were 100 per cent Export Oriented Unit).

Mr B.P. Singh, Chairman of the company, is a tea expert but he started his career as a professor of economics. This pedantic streak in him became apparent while he was explaining to Business Line the nuances of the industry and the prospects of his company.

Excerpts of the interview:

What is the cost of your capacity expansion programme and how would it be funded?

We are expanding in two phases from 3,000 tonnes per annum to 9,000 tonnes per annum. Of this, 5,000 tonnes per annum would be CTC and the rest orthodox tea.

There would be flexibility in the expanded capacity so that we can shift from one type of tea production to another, according to the demands of the market.

Civil construction has already started. The first phase is expected to be over by October this year and second phase in October 2006.

Total cost of the project has been estimated at around Rs 12 crore. State Bank of India has already sanctioned a term loan of Rs 3 crore. We have planned to come out with second public issue of Rs 10 crore soon. We have already filed the necessary papers with the SEBI.

As you are a bought leaf factory how would ensure the quantity of the leaves supplied to you?

Yes, our plantation is providing only 10 per cent of the green leaves that we require. However, with the help of Tea Board and UPASI (United Planters Association of South India) we have adopted a village called Thummanhutty. It is located near to our factory. The village has over 2,000 hectares of clonal variety of tea bushes. All are small growers. We have helped in training and provided assistance so that they concentrate on quality plucking only. In fact, all our tea leaves are supplied with a radius of 45 kilometer.

How does it help Beeyu in operating only from South India? Do you have any plan to enter the North India tea industry?

At present, we do not have any plan to enter the North Indian tea sector because this sector is facing several problems. We are comfortable in operating from the south and we would like to continue in that manner.

Even in South India we have major advantages over other players. For example our cost of conversion from green leaf to made tea is Rs 8 against the industry average of Rs 12. This low cost is primarily due to high level of automation at our factories. So we have managed to keep per unit cost of labour low despite paying them high. As we have integrated and expanded our operations, we have succeeded in further reducing our fixed overhead cost. At present, there are 600 factories in South India producing an aggregate of 200 million kg against which our two factories are currently producing 3,000 tonnes per annum.

Apart from capacity expansion do you have any plan for acquisition of tea gardens or factories?

We are contemplating to acquire a tea factory in Sri Lanka of one million tonne per annum capacity some time during 2005-06. Negotiations are already on. As we are operating in the mostly international market, we need to broad-base our operations. It would be difficult to grow and survive during difficult times without operating from more than one destination.

At present, there are 800 tea factories in Sri Lanka, of which, 400 are bought leaf units and rest are integrated with the tea estates. All Sri Lankan tea gardens are owned by the Government. The price of Sir Lankan factory would be roughly around Rs 2 crore.

Beeyu is a strong international player. You have a strong presence in the Russian markets. Do you have any plan to enter the domestic market?

Yes we are planning to enter the domestic market in a big way. We are waiting for the capacities to increase. We have already debonded our CTC unit. Earlier it was a 100 per cent EOU. It had already given us an opportunity to have a big presence in the domestic market. We would be selling both bulk and packet tea.

What is the status of Beeyu's proposed coffee factory in joint venture with Tata Coffee?

Yes we are actively considering to set up this coffee plant for manufacturing freeze-dried coffee. It would be a joint venture with Tata Coffee. This factory would be set up at Theni near Madurai in Tamil Nadu. There Tata Coffee has an existing coffee plant.

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`We have planned to come out with 2nd public issue '