Wadia group. Wadia group's Bombay Burmah to exit plantations business

The Mumbai-based Wadia Group’s plantation division — the Bombay Burmah Trading Corporation Ltd (BBTCL) — plans to exit the plantation sector in the country due to management issues and competition.

BBTCL had roped in real estate consultancy firm Colliers International for advice on the valuation of the business and potential buyers. BusinessLine has seen a copy of the Colliers report. The BBTCL spokesperson refused to comment on the development.

As part of its exit plan, BBTCL is looking to make an outright sale of eight of its coffee plantations in Kodagu district of Karnataka. These estates total 927 hectares (2,290 acres) of planted coffee (320 hectares for Arabica crop and 607 hectares for Robusta) producing about 627 tonnes of clean coffee annually, on average, out of which 50 tonnes are also organically cultivated, which is in demand for exports. These plantations are staffed by 300 permanent workers and another 300-400 on contractual basis, when required.

Financial losses

The eight plantation properties that are for sale include Raigode, Beetikadu, Toobenkolly, Choudicadoo, Fairlands, Banangala, Silpi and Mylatpur. “These estates have suffered serious financial losses due to poor management practices and have been incurring losses over the last 3-4 years, which is why BBTCL is looking to sell them, at ₹20 lakh an acre which would fetch them around ₹458 crore,” sources told BusinessLine .

“The company has been selling timber from its plantations regularly, resulting in excessive loss of shade that the trees provide to coffee plants, therefore leading to lower yields. Additionally, inadequate management of timber from these plantations, which resulted in trees falling on coffee plants and damaging them, is also a reason for the financial losses,” the sources said.

The company has also been headless for the last 14 months after its CEO, Dibakar Chatterjee, quit in January 2020.

Kodagu-based Tata Coffee had supposedly shown interest in purchasing these properties a couple of years ago. But, sources said, since it was prohibitively expensive, Tata Coffee did not pursue the sale. “It wasn’t a viable deal for Tata Coffee for several reasons: BBTCL’s estates are very old, bought in the 1950s. Therefore, replanting on a large scale would be necessary which would further delay returns by 8-10 years. Their yield per acre is just 50 per cent that of Tata Coffee’s. Additionally, BBTCL has sold most of the timber and rosewood and the estates are making losses as they are totally mismanaged,” the sources said.

The 150-year-old BBTCL, which has an annual consolidated turnover of $1.2 billion, entered the plantations business in 1913. Its tea plantations in South India cover 2,822 hectares and produce 8 million kg of tea annually. In Q4 of FY 2021, the company’s tea business made ₹17.42 crore while its coffee business made ₹1.29 crore. Losses incurred for the tea and coffee businesses for the same period were ₹1.9 crore and ₹0.85 crore, respectively.

A decade ago, BBTCL had sold 3,000 hectares of rubber plantations in Indonesia to clear some of its debts. Sources told this newspaper that the company now plans to sell its 500-hectare tea plantations in Tanzania.