Shares of several tea manufacturing companies are moving up in stock exchanges, thanks to surging brew prices across the country.
A senior official in a tea manufacturing company attributed the the prices increase to the expectations of the market that the tea producing companies would do well in the wake of crop shortage both in North and South India.
Akshay Agarwal, Managing Director of Acumen Capital Services, said major South India-based listed tea companies include Harrisons Malayalam, Bombay Burmah Trading Corporation, Neelamalai Agro Industries and United Nilgiri Tea Estates Company. Currently, Harrisons Malayalam is trading at ₹236, with a 52-week high and low of ₹259 and ₹129, respectively.
Bombay Burmah Trading Corporation has seen a significant increase, from ₹970 to ₹2,255 in a year. United Nilgiri Tea Estate and Neelamalai Agro Industries are trading at ₹422 and ₹4,202, respectively, but are relatively illiquid due to their low equity capital base, he said.
According to him, erratic rainfall in North India hurt tea production, leading to price hike of the brew. India’s tea prices are expected to remain high for the immediate future due to heat waves and floods affecting key producing regions during the peak harvesting season. South Indian tea companies like Harrisons Malayalam and United Nilgiri are well-positioned to capitalise on the growing demand, especially from the global market, with their well-accepted, high-quality teas, he said.
“However, we must remember the sharp rise in tea prices could be a temporary situation, and once the climate change normalises, tea production might increase and tea prices may correct. This trend could also be mirrored in the share prices of tea-producing companies, Agarwal said.
It is not only tea, the prices of all good quality stocks have moved up as P/E ratio of these companies skyrocketed. The widespread participation of retail investors in the stock market and push from operators and institutions also helped these stocks to surge. Bulk of the money comes from mutual funds, P Shreekumar Menon, former president of Cochin Stock Brokers said.