Harrisons Malayalam Ltd Management Discussions

The tea production in India for the period 2024-25 stood at 1,315.77 million kilograms. Within the total output, the CTC (Crush, Tear, Curl) segment remained the dominant category, contributing 1179.05 million kilograms (89.61%) of the overall production. The Orthodox variety accounted for 119.89 million kilograms (9.11%), while Green Tea production stood at 16.83 million kilograms (1.28%).

This production trend reflects the continued predominance of CTC teas in the Indian tea industry, catering primarily to the domestic market, which has a strong preference for this category. Orthodox tea, although smaller in volume, holds strategic importance due to its demand in traditional export markets such as West Asia, Russia, and parts of Europe. Green tea, though contributing a relatively minor share, has been witnessing steady growth owing to rising health consciousness and increasing demand in both domestic and international markets.

The production mix underscores Indias ability to serve diverse consumer segments, balancing the mass-market demand for CTC teas with niche and premium categories like Orthodox and Green teas.

The tea sector in India is expected to remain resilient in FY 2025-26, supported by stable domestic consumption and steady demand in key international markets. The production profile for 2024-25, with CTC teas comprising nearly 89.61% of the output, highlights the strong dependence on domestic consumption patterns, which continue to favor this category. This trend is likely to persist, with CTC production remaining the backbone of Indias tea industry.

The Orthodox tea segment, while accounting for a smaller share, will continue to play a critical role in sustaining export revenues. Traditional overseas markets such as West Asia, Russia, and parts of Europe are expected to drive demand, although global geopolitical and economic uncertainties may influence trade flows. Strategic initiatives to diversify into newer geographies, coupled with quality improvement measures, could provide further growth opportunities in this segment.

The Green tea segment is anticipated to witness gradual expansion, fuelled by increasing health awareness and lifestyle changes among urban consumers in India, along with rising acceptance in export markets. Although its contribution to overall production is still modest, the long-term potential of this category remains significant.

Overall, FY 2025-26 is expected to be a period of cautious optimism for the Indian tea industry. While challenges remain in terms of costs and global market volatility, Indias diversified production portfolio and strong domestic consumption base provide a solid foundation for sustained growth.

The production of Natural Rubber (NR) in India during 2024-25 was 8,75,000 tonnes, compared to 8,57,000 tonnes in 2023-24, reflecting a marginal year-on-year increase.

The domestic consumption of NR during 2024-25 stood at 14,10,000 tonnes, slightly lower than the 14,16,000 tonnes recorded in the previous year, indicating a stable yet high level of demand from the automobile and manufacturing sectors.

To meet this demand, imports of NR rose to 5,50,918 tonnes in 2024-25, up from 4,92,682 tonnes in 2023-24. This widening reliance on imports underscores the persistent demand-supply gap, with domestic production meeting only around 62% of total consumption requirements. On the export side, India shipped 4,199 tonnes of NR during the year, marginally lower than the 4,819 tonnes exported in 2023-24, reflecting limited surplus availability.

Overall, the industry continues to face the challenge of bridging the production-consumption imbalance, which has direct implications on trade dynamics and pricing trends in the sector.

The outlook for 2025-26 indicates that rubber prices are likely to remain elevated due to the persistent global shortfall and firm demand. India will continue to rely heavily on imports to bridge the demand-supply gap, though volatile global prices could put pressure on the trade balance. On a positive note, the expansion of rubber cultivation in the northeastern states is expected to strengthen domestic resilience and partially reduce dependence on imports. Industry forecasts also point to steady growth across key demand sectors such as automotive, medical, industrial goods, and infrastructure, reflecting the sectors long-term potential. However, risks remain, particularly from any slowdown in auto manufacturing or adverse weather conditions in major producing regions, both of which could amplify price volatility.

Tea and rubber plantations remain highly vulnerable to the unpredictable forces of nature, making it imperative to continuously evolve and refine harvesting and cultivation practices. These sectors are inherently labour-intensive and subject to stringent labour laws, which add to operational complexities. Key challenges faced by the industry include high labour costs, substantial social welfare and infrastructure obligations, and rising energy and input costs. Seasonal labour shortages in certain regions further compound these challenges, often disrupting operations during critical harvest periods.

The unorganized sector constitutes a significant 52% of the industry and benefits from considerably lower production costs. This cost advantage arises primarily from its exclusion from statutory social security and welfare obligations mandated under the Plantation Labour Act-obligations that are fully complied with by players in the organized sector. Consequently, the organized sector remains under continuous pressure from the cost competitiveness of small-scale growers.

In addition, external factors such as climate change, volatility in global markets, increasing competition from exporting countries, and recurring labour shortages continue to pose risks to the long-term sustainability of the tea and rubber plantation industries.

To mitigate these challenges and build resilience, our strategic priorities include:

• Enhancing labour productivity through targeted mechanization and the deployment of efficient agricultural technologies.

• Investing in research and innovation to develop differentiated products and value-added offerings, thereby strengthening brand positioning and capturing greater value across the supply chain.

• Implementing sustainable agricultural practices to improve crop yields, ensure product quality, and reduce the environmental footprint.

• Expanding proprietary and acquired operations to achieve economies of scale and improve cost efficiencies.

• Strengthening supply chain resilience through diversification and improved forecasting mechanisms to address climatic and labour-related disruptions.

• Leveraging digital tools and data analytics to enhance farm management, optimize resources, and support real-time decisionmaking.

Looking ahead, the anticipated stabilization of rubber prices, combined with volume growth in both tea and rubber from our existing and new operations, is expected to bolster our financial performance. Our unwavering commitment to sustainability, innovation, and operational excellence will enable us to overcome industry headwinds and deliver long-term value for all stakeholders.

Through these concerted efforts, we are confident in our ability to navigate the complexities of the plantation industry and ensure sustainable growth, profitability, and socio-economic contribution in the regions where we operate.

HML employs 7181 number of permanent employees across its tea and rubber plantatations. During the year under review, Harrisons Malayalam Ltd earned distinguished recognition through an array of prestigious rankings and awards.

Great Place to Work Recognition: Harrisons Malayalam Ltd. was ranked 21st in Indias Best Companies to Work For 2025 by the Great Place to Work Institute, in collaboration with The Economic Times. The company was also recognized among the Best Workplaces in the Agri Industry, underscoring its commitment to employee well-being. Innovation Award: In 2025, the company was named among Indias Top 50 Best Workplaces for Innovation, reflecting its efforts to foster a culture of creativity and progress. Leadership Recognition.

Industrial Excellence: Harrisons Malayalam Ltd.s Achoor Factory was honored with the Kerala State Industrial Award 2024-25, marking the third consecutive year that the Achoor Estate has received this distinction.

The Company also received a Certificate of Recognition for Outstanding Employee Relations 2023-24 from the Employers Federation of Southern India. In addition, Harrisons Malayalam Ltd. won the prestigious Golden Leaf India Award (TGLIA) for its Lockhart Tea Factory at the Southern Tea Competition-an award jointly organized by the Tea Board of India and the United Planters Association of Southern India (UPASI), recognizing the finest quality South Indian teas. These accolades collectively reaffirm Harrisons Malayalam Ltd.s dedication to nurturing a positive workplace culture and sustaining excellence across its operations.

HML has in place an adequate Internal Control system commensurate to its size and nature of operations. These have been designed to provide reasonable assurance with regard to recording and providing reliable financial and operational information, complying with applicable statutes, safe guarding the assets from unauthorized use or loss, extending transactions with proper operation and ensuring compliance of corporate policies. Internal Control is supplemented by regular management review, documented policies and procedures, as also internal audits. The Company has an Audit Committee, details of which have been provided in the Corporate Governance report. The Audit Committee reviews Audit Reports submitted by Internal Auditors. Suggestions for improvement are considered and the Audit Committee follows up implementation of corrective actions. The Committee also meets the Companys statutory auditors to ascertain their views on the adequacy of internal control systems in the Company and keeps the Board informed of its major observations from time to time.

During the year under review, the Company has recorded revenue of Rs.513.91 crores from its operations as compared to Rs.488.12 crores for the previous year. The total revenue, including other income for the FY 2024-25 was Rs.525.73 crores as compared to Rs.496.86 crores for the previous year. The total comprehensive income made by the Company for the FY 2024-25 was Rs.10.26 Crores as against a loss of Rs.12.27 Crores for the previous year. Key financial ratios are given below and the reason for variance in ratios exceeding 25% is because of increase in prices of tea and rubber. During the year under review, the Return on Net Worth improved significantly from (5.20%) in the previous financial year to 9.85% in the current financial year, primarily on account of improved operational performance. Higher realizations on account of favourable product prices, coupled with effective cost management, contributed to the enhanced profitability.

The Performance of tea and rubber is detailed below.

The Tea harvested from own gardens during FY 2024-25 is at 9824 MT (12,421 MT in the FY 2023-24). Bought leaf operations in tea for FY 2024-25 is at 2095 MT (3388 MT in FY 2023-24). For the year ended March 31,2025, the average price realized per kg of tea was Rs 168.55 as against Rs 140.10 realized during the Previous Year.

The Rubber harvested from own gardens stood at 4800 MT during FY 2024-25 and is lower than 5293 MT achieved during FY 2023-24. Bought operations in Rubber for the FY 2024-25 is at 3062 MT which is lower than the 4578 MT of FY 2023-24. For the year ended March 31, 2025, the average price realized per kg of rubber was Rs 216.19 as against Rs 179.47 realized during the previous year. 140 hectares in Kumbazha Rubber Estate encroached by trespassers, continue to remain untapped.

Statements in the Management Discussion and Analysis describing the Companys objectives, projections, estimates and expectations are "forward looking statements" within the meaning of applicable securities laws and regulations. Actual result could defer materially from those expressed or implied. Significant factors that could make a difference to the Companys operations include domestic and internal economic conditions affecting demand and supply, commodity prices, changes in Government regulations, tax regimes and other statutes. Market data and product information contained in this Report have been based on information gathered from various published and unpublished reports and their accuracy, reliability and completeness cannot always be assured.