Mcleod Russel - The world's largest producer of Tea ( Stock Analysis )

India wakes up with tea every morning. It is the drink that enlivens, energises and rejuvenates the mind and the body. It is the drink that binds people across cultures. This is why Eveready has lined up a wide range of tea blends to match the needs of a diverse tea-drinking nation and the different "tea cultures" that are an integral part of the country’s socio-cultural fabric.








Eveready, the group Company of the largest bulk tea producer in the world, McLeod Russel India Limited,  A member of The Williamson Magor Group, markets and distributes packaged tea across the nation.
From the valleys of Assam to the hills of Darjeeling, our promise of bringing the freshness and strength to each cup of tea can be experienced in the brew of all our brands.
The superior quality is a result of meticulous process that involves skilled selection of tea leaves based on expertise in tea tasting and understanding of Consumer needs. Eveready today has offerings worthy of the name of Williamson and Magor as well as Eveready Industries India Ltd. - Eveready Premium Gold, Eveready Tez Premium, Eveready Tez Red  and Eveready Jaago. Brands, which satisfy the diverse moods of the tea drinker.






McLeod Russel India Ltd. is a Tea company having 53 Tea Estates in India (58 in Assam and 5 in West Bengal) and several other tea estates in Vietnam, Uganda and Rwanda. The company including its subsidiaries had produced 112.23 Million KG’s of Tea in FY 2014 and on a stand-alone basis the company had produced 87.1 million KG’s of Tea in FY 2014. Mcleod Russell (India) Ltd. happens to be one of the largest listed Tea companies in India.

Employee costs are the single largest cost component in a Tea business in India and makes up for nearly 1/3 of a company’s revenue. The number of employees’s are significant in Tea industry and usually companies enter into Labour agreements with respect to wages and are revised periodically. The company had mentioned in its annual report that wage revision is due in the State of Assam in January 2015 and on 1st April 2014 in West Bengal.  If the wages are raised significantly without corresponding increase in Tea prices (Due to global supply demand factors), it could have an adverse impact on the margin’s of the company.

In spite of various ups and downs in Tea prices in the past several years, the company has been able to maintain its EBITDA in the range of Rs. 300-330+ crores range. However increased finance costs seems to have eaten much into the profits of the company. The increase in finance costs is surprising given the fact that the Debt figures have been at near  stable levels for the past several years. The company continues to maintain comfortable debt to equity ratio. The dividend payout has been excellent so far.



The company is one of the largest exporters of black tea from India and it has consistently exported nearly 30% of its production in the past few years. This had helped the company capitalize on higher export realisations when the global tea markets are tight.

At current market capitalisation the stock is trading at a trailing around of  PE of 20,  Even assuming better profits for FY 2015, I find the current valuation to be fairly valued for an agricultural commodity company . The recent surge in tea prices along with bullish market mood , should keep up the momentum in the stock for sometime


McLeod Russel India Ltd. is a Tea company and is one of the largest producer and exporter of black tea in India . As the North Indian tea auction prices have moved closer to record levels and with the current stock market mood being bullish , the momentum have propped up the stock price . However for long-term investment the stock offers little valuation discount at current market price . This is certainly one of the best Tea companies to own.