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Harrisons Malayalam - Planting Dynamic Growth

An integrated agriculture operation giant – this is what the company primarily describes itself as.  Can you just take us through the various business segments of the Company?
Harrisons Malayalam Limited (HML) is primarily a Plantation Company.  We are the largest Rubber producers in India and we have large Tea plantations as well.  Besides these two plantation crops, we grow spices, namely Pepper, Cardamom and Clove.  We are also the largest producers of Pineapple in the country.  Company has small plantations in Cocoa and Coffee also.   Besides the agricultural operations, company also has a Projects Engineering Division and C&S Division (Clearing & Shipping) as well as Plant Tissue Culture.  Other than the tea and Rubber, all other operations are comparatively small.

India has predominantly been an agrarian economy.  HML’s presence in this vital sector dates back to many years.  How has been the journey so far considering that you operate in segment which is the cornerstone of the India economy?
HML’s history can be traced back to more than 150 years.  All along, it has been a pioneer in the plantation sector.  Majority of the plantations in South India can be linked to HML at some point or the other.  Plantations have changed many hands in the past.  This is primarily due to the very nature of the business and their profitability which is totally dependent on the commodity prices and the wages being paid to the workers.  There have been times when the costs have been comparatively high for a longer period and the plantations have been losing money.  That is the time when plantations become very vulnerable and the ownership tends to change.  During the favourable commodity prices, plantations tend to make handsome profits.  Therefore, the Plantation Industry must be seen from long term perspective.  Same has been the experience of HML.  We have also faced many hurdles in our past; but we have been able to overcome them.

Tell us something about your brands.  How strong are the company’s brands in the various segments that it operates in?
HML itself is a brand in Rubber.  Harrisons Cenex (centrifuged latex) sells at a premium mainly because of our commitment to the quality and our professional and transparent dealings.  We provide an excellent customer service to all our rubber users.

In Tea, we have one premium brand for each of the geogra-phies we operate in.  The name of the brands are ‘Surianalle’,  ‘Moongalar Gold’ and ‘Surya’.  All these three brands are the brands in the bulk tea segment.  Buyers in the various auction centres buy these brands and pay premium prices for the teas mainly because of our attention to the quality and dependability of the offerings in the auctions.  Our blenders and tea packteers rely on HML to offer quality teas in the auctions every week and hence they are sure of our teas for completing their blends.[PAGE BREAK]
Can you take us through your Capex plans over the near future?
Company has been investing Rs.18 to 20 Crores every year in the replanting activities in Tea & Rubber since last couple of years.  This was necessarily required to catch up with the back-log of the previous years. Presently, replanting in Rubber is more or less complete.  Tea division will take another 3 to 4 years to complete the replanting and infilling works.  While the backlog of replanting should be over by next year, this is going to be a normal activity thereafter, as about 3% of the area in Rubber and 1% of the area in Tea must be replanted every year.  This would require Rs.10 to 12 Crores investment of capital nature in plantations from the year 2012/’13 onwards.

We intend investing another 15 Crores over a period of next two years for modernizing our tea and rubber factories.  This will help us in reducing the operating costs. Majority of our Capex’s are treated as Revenue Expenditure and they become the part of Profi t & Loss statement in our accounting.  We plan to meet our Capex funding from internal accruals.

The emergence of commodity exchanges has led to sea change in the way commodities are traded in the country today.  What is your take on this?
While it is a fact that commodity exchanges have helped the producers and the buyers of the commodities to go for a price discovery mechanism in a smooth manner, some people are of the opinion that this has lead to the wide price fluctuation.  An element of speculation is definitely involved in these commodity exchanges.  Some degree of increased regulations to reduce the price fluctuation would definitely strengthen the commodities exchange.  As long as this is used by the genuine buyer and seller for price discovery and for hedging their cost and returns, this is a wonderful mechanism.

What does the future look like?
HML is a growing company and we look forward to increasing our profits in the future.  Last 3 to 4 years was a period of plantation rejuvenation for HML which involved huge expenditure of capital nature.  The benefits of those expenditure and initiatives would start coming in from now onwards.   I expect that from next financial year onwards. Our rubber and tea production would start growing year after year.  This will lead to substantial increase in the bottom-line.  Investors can expect better returns on their investment in HML. The company is on the path of immense growth in the coming years.  It is expected that HML would be bifurcated for bringing in better focus and increased efficiencies.  Each of the divided company would then start growing independently. I am sure this must lead to much faster growth.  HML’s investors today can expect the benefit of the immense future growth from each of these two Companies.

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