Tata Tea advanced further on Wednesday on buying support from market players including institutions.

The scrip of the Tata group tea major climbed 3.15% to Rs 224 on BSE. It recorded volumes of 51,367 shares on BSE by 13:25 IST. In fact, the scrip is being accumulated by institutions over the last three-and-half months on hopes that the company's performance for the January-March 2003 quarter will be impressive on the back of a sustained rise in tea prices. The Tata Tea scrip has risen by 43% from Rs 157.05 on 30 January 2003.

Meanwhile, as per market talk, brokerage Tata TD Waterhouse was buying on behalf of the company.

There's much hope that the company will post impressive results for the quarter ended 31 March 2003.  The reckoning is based on the fact that tea prices have firmed up of late due to the recent strike by traders. Analysts say the MQ 2003 results of Tata Tea (TTL) are likely to be good. However, they expressed concern over the fact that tea prices are now heading south, although they are higher than last year. Analysts say that if tea exports to Iraq commence (after the disruption due to the war), then the prices may rule firm.

Meanwhile, reports that the company's subsidiary Tetley has plans to enter the Pakistan market have also generated buying interest in the TTL stock. Hopes of a normal monsoon this year has also generated interest in selective FMCG counters.

The performance of TTL's overseas subsidiary Tata Tea (GB) has also improved of late.

Recently, TTL said it would receive a windfall dividend of Rs 25.35 crore from Tata Tea (GB). TTL has a 84.50% equity stake in Tata Tea (GB). The company also stated that Tata Tea Inc., USA, its wholly-owned subsidiary, which is also a shareholder of Tata Tea (GB), will receive a dividend of Rs 4.2 crore. The dividend will be taken into consideration by both the companies in the fiscal ended March 2003.

This dividend inflow will see TTL's earnings per share (EPS) rise by Rs 4.50 for FY 2002-03.

Earlier Tata Tea (GB) raised a fresh debt of £174 million, all of which was senior debt, to retire its high-cost loans. The refinance was co-arranged by Rabo Bank International together with the Royal Bank of Scotland Plc. The weighted average interest cost of the new debt raised by Tata Tea (GB) averages approximately 6.70% per annum, thereby effecting savings in terms of future interest costs of the company by approximately £6 million per annum.

On 28 February 2003, the debt that was outstanding in Tata Tea (GB), the special purpose vehicle (SPV) that holds 100% equity of Tetley Group, UK, was refinanced. Consequently, £114 million of senior debt, £49 million of mezzanine debt and £8 million of secured loan stock debt, aggregating to £171 million, was paid off -- the weighted average interest cost of which was approximately 10.22% per annum.

TTL has plans to merge the SPV with itself after the latter repays its loans. At the time of acquiring Tetley, Tata Tea (GB)'s debt-equity ratio stood at 3:1, which has reduced to 1:1.75 currently and is expected to come down to 1:1.6 by the end of the current financial year following the infusion of fresh funds. A certain segment of the debt is expected to be paid through internal accruals.

Tata Tea (GB)'s interest burden, which was £26.11 million in 2000-01, reduced to £23.33 million in 2001-02. It is likely to fall further with the restructuring of high-cost debt.

TTL's DQ 2002 results were not very impressive. For the quarter ended 31 December 2002, it posted a 17.90% drop in net profit to Rs 16.97 crore (Rs 20.67 crore) on total income of Rs 191.41 crore (Rs 197.50 crore). For the nine months ended 31 December 2002, the company's net profit stood at Rs 67.10 crore (Rs 88.29 crore) on total income of Rs 567.22 crore (Rs 575.85 crore).

As on 31 March 2003, promoters held 29.5% stake in TTL, while institutions and the public held 34% and 31.85%, respectively.