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Dhunseri Tea & Industries Limited — Credit Ratings, 09-01-2025: Credit Rating
Dhunseri Tea & Industries Limited has reported a consolidated total income (TOI) of ₹1,395.42 crore for FY24, reflecting a 17% year-over-year increase from ₹1,337.48 crore in FY23. This growth is primarily attributed to the added production capacity from newly acquired tea estates, despite facing operational losses due to lower tea realisation and adverse weather impacting crop yields. The consolidated net loss for the period amounted to ₹141.10 crore, a significant decline compared to the previous year’s figures.
In terms of operational performance, the company posted a PBILDT of ₹395.42 crore in FY24, but a substantial improvement was seen in HIFY25, with PBILDT recovering to ₹157.32 crore against a loss of ₹5.13 crore in HIFY24, indicating a partial recovery in profitability driven by higher bulk tea realisations amidst steady sales volumes. However, sustaining these profit levels may be challenging due to the seasonal nature of the tea business, particularly with Q4 being a traditionally weaker quarter.
The company’s operational costs have increased, influenced by rising wage prices, which constitute a substantial portion of production expenses. The overall gearing ratio, while moderate at 0.51x, suggests growing debt levels contributing to weakened debt coverage indicators.
Liquidity remains adequate, bolstered by cash and liquid investments, and recent asset sales aimed at addressing operational deficits. On the strategic front, the focus on enhancing production quality and efficiency in existing tea gardens indicates a forward-looking approach to mitigating risks associated with the labour-intensive nature of the tea industry and agro-climatic challenges.
Given the current financial performance, ongoing operational challenges, and improvements in profitability trends, the outlook appears cautiously optimistic. Investors might consider this a hold opportunity while keeping an eye on the company’s recovery in the tea production landscape.