Synopsis:
Kanco Tea & Industries Ltd surged by 12% after reporting a QoQ revenue growth of 207%. Also, it reported a staggering YoY net profit growth of 128 percent. However, the company faces problems with debt obligations.
With a market capitalization of Rs 34.1 crores, the shares of Kanco Tea & Industries Ltd are currently trading at Rs 66.6 per share, down by 38 percent from its 52-week high of Rs 107 per share. Over the past five years, the stock has delivered a positive return of 105 percent.
Q1 Highlights
The company reported a revenue of Rs 13.12 crore, up by just 0.46 percent from its Q1 FY25 revenue of Rs 13.06 crore. However, on a QoQ basis, it surged by 207 percent from Rs 4.27 crore.
Coming to its profitability, the company reported a net profit growth of 128 percent to Rs 2.23 crore in Q1 FY26 as compared to Rs 98 lakhs in Q1 FY25. Additionally, it reported a net loss of Rs 9.78 crore.
As of March 2025, Kanco Tea carries a debt of Rs 46 crore, forming 37 percent of its total liabilities, while reserves stand at Rs 56.21 crore (45% of total liabilities). However, the company’s financial health appears strained, with a high debt-to-equity ratio of 1.25x and a negative interest coverage ratio of -1.39x, indicating challenges in servicing its debt. Additionally, negative ROE (-12.93%) and ROCE (-4.12%) reflect weak returns and operational inefficiency.
In FY25, the company experienced a decline in both production and sales of black tea, with production dropping by 29.3 percent to 22.39 lakh kgs from 31.69 lakh kgs, and sales falling by 33.2 percent to 21.86 lakh kgs from 32.73 lakh kgs in the previous year. Despite this volume decline, the company recorded a strong 24.5 percent increase in average realisation, which rose to Rs 290.95 per kg from Rs 233.79 per kg.
The company is engaged in the plantation, production, and sale of black tea, a seasonal business operating from March to December and dependent on weather conditions. By consistently improving field practices, it ensures better output and maintains its position in the premium tea segment. This focus on quality enables the company to cater to valued customers and benefit from rising realisations of high-grade teas.
Written by Satyajeet Mukherjee
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