Dhunseri Tea & Industries Ltd (DTIL) is set to buy three tea estates of Warren Tea in Assam - Deohall, Tara Tea and Duamara - for an estimated Rs. 90.80 crore.
The board of DTIL on Monday approved the acquisition proposal, the company said in a stock exchange filing.
In another development, the company said Dhunseri Petrochem & Tea PTE, a subsidiary of DTIL, would start production at its petrochemical plant at Panagarh in West Bengal in March. The second line of the facility will become functional in 2025 and a third will come up later.
Referring to the acquisition, DTIL chairman CK Dhanuka told ET that the total production of the three estates was 2.68 million kg. "We have offered Rs 338 per kg to Warren Tea for acquiring these gardens. The deal will be completed by December 31, and we will take control of the estates from January 1, 2023."
The total investment for the new petrochem plant is Rs 1,450 crore, Dhanuka said. DTIL currently has eight tea estates and 10 tea factories in Assam. It also owns two tea estates in Malawi, East Africa where plantation of tea and macadamia is being undertaken. With this acquisition, DTIL's own production will increase to around 9 million kgs.
DTIL's sister concern, Madhuting Tea, has bought Hatimara tea estate in Assam and its production will go up to 1.5 million kgs after acquisition. DTIL also buys 3.5 million kg of teas a year from bought leaf factories. So, the consolidated production will now reach 14 million kg.
Dhanuka said the tea estates that DTIL would be acquiring would produce quality Assam teas. "The teas will be used for meeting domestic demand. We are expecting the central government to come out with a floor price of tea, which will help the sellers. As of now it is a buyers' market for tea, but the dynamics will change when the minimum floor price is introduced," he said.
Tea prices are currently governed by demand and supply, so when there is excess crop, the prices fall and during times of lower production, they increase.
A floor price could take into account the cost of production, ensuring a self-sustainable model for both small and large producers.