Jay Shree Tea forms JV with Rwanda firm2 min read . Updated: 13 Jan 2010, 10:30 PM IST
Jay Shree Tea forms JV with Rwanda firm
Kolkata: One of India’s biggest tea producers, Jay Shree Tea and Industries Ltd has formed a joint venture with a Rwandan firm to acquire plantations in the central African nation, unfazed by the difficulties McLeod Russel India Ltd is facing in securing control of estates there.
The 50:50 joint venture founded by Kolkata-based Jay Shree Tea is expected to snap up by the end of January majority control in at least two tea plantations being disinvested by the Rwandan government, said an official of the Tea Board, the tea industry regulator. He did not want to be named because he is not authorized to speak to the media.
“The Rwandan government and Jay Shree Tea have agreed upon key terms and conditions," he said. “You could expect a formal announcement in 10 days or so." The two gardens together produce around 4 million kg of tea a year.
The Rwandan government plans to sell a 60% stake in tea estates immediately and another 30% in some time. The balance 10% would eventually be held by a cooperative of plantation workers, he added.
Jay Shree Tea’s managing director D.P. Maheswari said his firm was evaluating “acquisition possibilities in Rwanda, Uganda and Burundi", but refused to offer any further comment.
McLeod Russel, the world’s biggest tea producer, had in August bought a 75% stake in Olyana Holdings Llc, a US firm that had acquired the Gisovu tea estate in Rwanda. But the Rwandan government later called off its deal to sell a 60% stake in the estate to Olyana.
The Rwandan government didn’t want the Gisovu tea estate to be controlled by a foreign company, according to Nigel Melican, managing director of Teacraft Ltd, a UK-based consulting firm that had advised Olyana on the deal.
Learning from McLeod Russel’s experience, Jay Shree entered into a joint venture with a local tea company, said the Tea Board official. “Jay Shree Tea’s partner will play a key role in distribution of the tea produced in Rwanda."
The estate would be Jay Shree’s first outside India. The firm is also looking to buy four gardens in Uganda, but talks with the owner have “hit a roadblock", the Tea Board official said. Jay Shree has 22 tea gardens in Assam, West Bengal and Tamil Nadu, and produces 22-23 million kg of tea a year.
Many Indian tea producers are fighting to get a toehold in Africa. Production cost in African countries is around $1 (Rs45.70) a kg, cheaper than the Rs65-70 a kg it costs in India.
In a deal concluded in December, McLeod Russel snapped up six tea gardens in Uganda for $30 million. “McLeod Russel paid around Rs95 a kg (of tea produced) for the Uganda gardens," said the Tea Board official. “The Rwandan gardens should cost the same or a tad less."