Dhunseri Tea & Industries Limited (DTIL) has received a reaffirmation of its credit ratings from CARE Ratings Limited, highlighting the company's financial stability and operational performance in the tea industry.

Credit Ratings

CARE Ratings has reaffirmed and assigned the following ratings to DTIL:

The long-term bank facilities amount has been reduced from ₹153.20 crore previously.

Key Rating Drivers

Strengths:

1. Experienced Promoters: DTIL benefits from the extensive experience of its promoters and an established track record in the tea industry spanning over five decades.

2. Operational Scale: The company operates 10 tea estates and 10 tea factories in Assam, along with overseas subsidiaries in Malawi producing tea and macadamia nuts.

3. Group Liquidity: Significant comfort is derived from the group's liquidity, including cash and liquid investments in mutual funds and listed securities.

4. Operational Improvement: DTIL showed improvement in quarterly results with PBILDT of ₹24.06 crore in Q1FY26 compared to a loss of ₹6.64 crore in the corresponding quarter of the previous year.

Challenges:

1. Subdued Financial Performance: FY25 saw consolidated revenue increase by 15% to ₹456.38 crore, but the company reported operating losses of ₹18.06 crore.

2. Production Challenges: Adverse weather conditions and pest attacks in recently acquired tea gardens led to production losses.

3. Overseas Performance: The company's overseas subsidiaries continue to be affected by lower realization of macadamia.

4. Industry Constraints: DTIL faces challenges due to the moderate scale of operations, labor-intensive nature of the tea industry, and susceptibility to agro-climatic risks.

Financial Performance

NM: Not Meaningful; NA: Not Available

Outlook

The stable outlook reflects DTIL's strong financial flexibility as part of the Dhunseri group and its demonstrated track record of successfully managing the tea business. The company's ability to sustain the improvement in financial performance will be crucial going forward.

DTIL's ratings continue to benefit from the promoters' extensive experience, the company's established track record in the tea industry, and the group's liquidity position. However, the ratings are constrained by the company's moderate scale of operations, labor-intensive nature of the tea industry, and susceptibility to agro-climatic risks affecting both tea and macadamia businesses.

As Dhunseri Tea & Industries navigates through the challenges in the tea industry, investors and stakeholders will be closely watching the company's ability to improve its operational performance and maintain its financial stability in the coming quarters.

Dhunseri Tea & Industries Limited (DTIL) has taken a significant step to strengthen its investment in its wholly-owned subsidiary, Dhunseri Petrochem & Tea Pte Ltd (DPTPL). The company's board has approved a proposal to subscribe to Optional Convertible Debentures (OCDs) worth USD 1.00 million offered by DPTPL.

Key Details of the Transaction

• DTIL has entered into a Debenture Subscription Agreement with DPTPL for USD 0.60 million of the total USD 1.00 million approved OCDs.
• The OCDs carry an annual interest rate of 7.50%.
• The debentures can be converted into equity shares within 7 years from the date of allotment.
• Interest will accrue yearly but will only become payable upon redemption or conversion of the OCDs.

Terms of the Agreement

• The conversion price for the OCDs will be determined on an arm's length basis, using accepted valuation methodology at the time of conversion.
• The transaction is classified as a related party transaction, conducted at arm's length.
• DTIL currently holds 100% of the shares in DPTPL, its wholly-owned subsidiary.

Financial Implications

This strategic move by Dhunseri Tea & Industries Limited demonstrates the company's commitment to supporting its subsidiary's growth and operations. The Optional Convertible Debentures provide DTIL with the flexibility to convert its investment into equity shares in the future, potentially increasing its stake in DPTPL.

Corporate Governance

The board meeting that approved this decision was held on September 11, commencing at 11:00 hours and concluding at 11:15 hours. The company has duly informed the stock exchanges, BSE Limited and the National Stock Exchange of India Ltd, about this development in compliance with SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

This investment decision by Dhunseri Tea & Industries Limited reflects its confidence in the future prospects of its subsidiary, Dhunseri Petrochem & Tea Pte Ltd, and aligns with its strategy for group-wide growth and expansion.