LARGEST TEA GARDEN FIRM OF WORLD

TALK: We have built largest tea plantation firm in the world – Deepak Khaitan

FROM TIMES OF INDIA



The eldest son of the legendary tea baron Brij Mohan Khaitan, Deepak Khaitan, has inherited his father’s passion for tea and sports, but hasn’t quite stuck to the same protocol. In Eveready Industries India, Deepak has the country’s largest battery manufacturing facility as well, while in tea, the group’s flagship company, McLeod Russel India, is now the world’s largest tea conglomerate. n a interview with Anuradha Himatsingka of ET NOW, Deepak Khaitan dropped his guard and talked exclusively about his group, his passions and his family.

How has your group fared over the last five years and more recently, during the economic slowdown?

We have had a tough five years. We had to go through a massive restructuring. The change took place in 2005 when we demerged Eveready and formed two large businesses, battery and tea plantations. That gave a great a fillip to both the companies. Both grew. We went and bought BPL Power Cell. Battery grew to be the fourth-largest brand, pushing up our market share to about 55%.

Simultaneously, McLeod Russel went and acquired the Magors, Doom Dooma Tea and Moran Tea. Recently, we’ve gone and acquired 40,00,000 kgs in Vietnam. With these acquisitions, we have become the world’s largest plantation company with near 80 million kgs of tea, employing over 30,000 people and exporting about 25 million kgs. The second company is a very far second.

We have always believed in tea. Our family virtually grew from tea. We feel it is the cheapest drink in India after a glass of water, which is free. A poor man wakes up in the morning and drinks a small cup of tea. We feel as the country grows and as GDP grows, more wealth goes into the hands of the poor man. Tea consumption, which had been growing at 1.5-2 % for many decades, has suddenly picked up to about 3.5%. I feel that over the next five years, tea consumption will go up to something like 5% per annum on a consumption pattern of about 850 million kgs.
If you add 5% and compound it over a period of 5 years, you are virtually asking the crop to grow by 250%. That is, I think a very difficult task what with varying climate conditions and land-related problems. The government is not giving more land for tea, as there is land problem in every state. So tea price is bound to go up. Import of tea will have to take place one day and therefore, we hope to grow our tea business further, with acquisitions both domestically, if available, and abroad, whether in Vietnam or Africa.

You are the only group that is still acquiring tea estates, unlike other companies, who are moving out of the business altogether. Why?

My father had got into tea in 1963. We’ve been able to manage the environment and we have been able to manage the workers. We never really had a problem. Tea estates have gone through crisis in Assam in the 1990s, with the Ulfa. We had managed the situation. We had got security. We have got a very dedicated system, very dedicated people who are working on it. So for us, to expand or to take on something that is not good and redo it, is pretty normal.

Are you open to more acquisitions? Are you right now looking at something to buy within India or abroad ?

We are seriously open to more acquisitions. I do not know whether we will be able to. It is not easy at the moment because tea prices have shot up. Sellers aren’t quite there, and those that are there are asking for very high prices, which we are not prepared to pay. Therefore, right now we are basically looking for acquisitions abroad. Domestically, we are not.

Apart from EIIL and McLeod Russel, can you tell us about your plans for the other group company, McNally Bharat Engineering?

McNally Bharat Engineering, I think is a company that many people don’t know much about. It is an eastern engineering business, which three and half years ago, had a turnover of about Rs 300 crore. Over the last 3 years, we grew steadily. We have suddenly grown to about Rs 1,100 crore now. I think it will grow at something like a 50% CAGR for the next three or four years. We do have a vision of crossing Rs 5,000 crore by 2012. The sectors that McNally services, will have to grow if India has to have a 9% growth in GDP. Infrastructure will have to grow, whether that means power stations, coal, minerals, zinc, copper or iron ore. We are also in road building, in bridges, in cranes and in material handling.

We just finalised an acquisition in Germany which gives us technology in the coal mineral field. It will help us to make coal washeries. India needs coal washeries in a big way because of the ash content in coal. So with these projects in hand and opportunities coming up, even with acquisition of the German company, we will have an opportunity to grow outside India. I’m quite confident that we will become a Rs 5,000-crore company very soon.

Is McNally Bharat also looking at acquisitions?

We are always looking at technologies related to infrastructure and if we do find a good technology fit with McNally Bharat, and the company is available at a reasonably good price, we will buy it. We feel that McNally Bharat needs technologies to grow in this business. At the moment and for a year or so, we will have to consolidate the German acquisition and then take it forward from there.

Has your group created a war chest to part finance the group’s acquisition plans ?

We never really had a war chest anytime because I feel that if you have money, you don’t have opportunities and when opportunities come, you really don’t have a chest. But if it is a good opportunity, and it is structured well, we can easily create enough internal generation of funds.