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North Indian tea producers are set to register higher profit margins in FY2018, but are likely to experience pressure given the possibility of a sharp increase in wage rates.
Profit margins of bulk tea players, particularly North Indian producers, are likely to improve in the current fiscal, but implementation of a new wage agreement for tea plantation workers, which is currently under negotiations, may hit their operating margins, credit rating agency ICRA has said.
There is a possibility of a steep increase of around 25 per cent in wage rates over the next couple of years. If it happens, organised bulk tea players will witness a considerable deterioration in operating margins, said Kaushik, Das, ICRA Vice-President and sector head, in a statement.
Although India recorded a 10.5 per cent decline in output during January, ICRA said domestic cropping trends were not indicative of the full-year pattern, since the full-year trend will primarily be determined by cropping levels during the peak production period June to October.
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