| Experienced management with long standing operations
GARPL has established a long presence in the tea industry. The promoters, Mr. Shakir Randerian and Ms. Afroze Randerian has aided in the growth of the company with their two decades’ extensive experience. The company specializes in orthodox tea and also sells blended varieties (like CTC and Darjeeling tea) under the brand name "Gulabi Tea." About 90% of sales comes from orthodox blend tea, with the Gulabi Barooti emerging as the best-selling product. The company sources tea from 20 different tea gardens from Assam and then blends according to their formula requirements. The company procures tea both through auctions and private purchases. All suppliers have been business partners for 20 to 30 years. The majority of sales are generated from Gulf and Middle Eastern countries. Acuite draws comfort from the company’s experienced management and strong relationship with consumers and suppliers.
Steady scale of operations
The company has achieved revenues of Rs. 52.32 Cr. in FY2024 as compared to revenues of Rs. 41.12 Cr. in FY2023. Further the company has already achieved revenue of ~Rs.55 Cr. in FY25. This steady increase in revenue was due to increase in price of tea but decrease in quantity sold. GARPL has an unexecuted order book position to the tune of about Rs.27 Cr. as of April 2025 which will be executed within 5 months, thus providing moderate revenue visibility over the medium term. Further, the operating margin of the company stood similar at 3.43% in FY2024 as against 3.66% in FY2023 on account of increase in material costs such as raw material costs, gratuity and travelling expenses. The PAT margins stood at 1.27 per cent in FY2024 as against 1.59 per cent in FY2023 due to high interest costs. Acuite believes that the scale of operations will remain on similar lines over the medium term.
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| Intensive working capital cycle
The working capital intensive nature of operations of the company is marked by high Gross Current Assets (GCA) of 470 days for FY2024 as against 530 days for FY2023. The GCA days are mainly on account of high inventory days and receivables days. The inventory days of the company stood at 300 days in FY2024 as against 368 days in FY2023. the company maintains a stock buffer of 6 to 8 months to mitigate potential disruptions since tea can be stored for three years or more. The entire tea processing cycle takes ~2 months, including transportation to Kolkata, which helps in maintaining adequate stock levels. Additionally, the packing materials required for this inventory were valued at Rs. 12.00 crore.
Further, the debtor days of the company stood at 137 days for FY2024 as against 131 days for FY2023. The credit terms are on average is ~2 to 3 months. Against this, the company has substantial dependence on its suppliers to support the working capital; creditors stood at 251 days for FY2024 as against 261 days for FY2023. The increase in creditor days was due to year-end purchases. The credit terms on an average are ~2 to 3 months. Acuite believes that the working capital operations of the company will remain at the similar levels over the medium term.
Average Financial Risk Profile
The financial risk profile of the company is marked by moderate net worth, modest gearing and average debt protection metrics. The tangible net worth of the company stood at Rs.15.10 Cr. as on March 31, 2024, as against Rs.14.54 Cr. as on March 31, 2023, due to small accretion to reserves. Furthermore, the gearing of the company stood modest at 1.71 times as on March 31, 2024, as against 1.76 times as on 31 March 31, 2023. The Total Outside Liabilities/Tangible Net Worth (TOL/TNW) stood at 3.81 times as on Mach 31, 2024 as against 3.52 times as on March 31, 2023. The debt protection matrices of the company remain moderate marked by Interest coverage ratio (ICR) of 1.57 times and debt service coverage ratio (DSCR) of 1.31 times for FY2024. The net cash accruals to total debt (NCA/TD) stood healthy at 0.03 times in FY2024. Going forward, Acuite believes that going forward the financial risk profile will remain average over the medium term, supported by steady accruals and moderate capital structure.
Volatile tea prices and agro climatic conditions
The prices of tea are linked to the auctioned prices and further to prices of tea in the international market. Significant price movements in the international market may affect the company’s profitability margins. Further, tea prices fluctuate widely with demand-supply imbalances in the domestic and international market. Tea is a perishable product and demand for it is relatively perfectly inelastic as it caters to all segments of society. While demand has a strong growth rate, supply can vary depending on climatic conditions in the major tea growing countries. Unlike other commodities, tea price cycles have no linkage with the general economic cycles, but with agro-climatic conditions.
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