Agarapatana Plantations to go big with mechanised harvesting next 18 months  

• Aims for 30% mechanised harvesting within next 18 months
• IPO to raise Rs.747.6 mn, set to open on August 10

By Nishel Fernando

Agarapatana Plantations Pvt Ltd, a subsidiary of Lankem Group targets to harvest 30 percent of its green leaf through mechanised harvesting within next 18 months in order to increase its production to nine million kilos of tea.

“The idea is that we will be able to reach 30 percent target of mechanised harvesting within next 18 months, if not quicker,” Agarapatana Plantations Pvt Ltd Non-Executive Director Anushman Rajaratnam told Mirror Business on the sidelines of an investor forum organised in Colombo yesterday.

Agarapatana Plantations’s IPO is set to open on August 10th with the earlier listing date set on first week of September. The company plans to raise Rs.747.6 million by issuing 83 million shares at Rs.9 each.
Although the company employed 22,000 workers in its estates in 1992, Agarapatana Plantations Executive Director Sunil Poholiyadde noted that the current number of employees has plummeted to 9000, which has pushed the company to move into merchandised harvesting.

In addition, he noted that mechanised harvesting is bringing a saving of 43 percent in terms of cost when compared to manual harvesting.

Further, the company is conducting a pilot project in spraying chemicals (fungicidee) using drones with a US-based company. “The feasibility is proven,” Rajaratnam noted.

The company is also considering the use of irrigation systems to ensure year-around harvesting, particularly in the estates in Uva province.

The company hopes to utilise the money raised via the IPO in modern equipment to develop its factories into “state-of-the-art processing centres” by gradually replacing old machinery with modern equipment and settlement of high-cost term loans. 

Capital Alliance Partners Limited is acting as the Managers and Financial Advisors to the issue. 

According to calculations by Capital Alliance Partners Limited, a share of Agarapatana Plantations has been priced at a 16 percent discount on the simple average of PER, P/BV and EV/hectare valuations.

For the nine months ended December 31, 2022, the company’s revenue rose by 93 percent YoY to Rs.6.38 billion.  During the same period, the company recorded a net profit after tax of Rs.1.88 billion compared to a net loss of Rs.43.93 million in the corresponding period in 2021/22 FY.

The company’s debt-to-equity ratio was 1.13x as at December 31, 2022. With the settlement of the loans with IPO proceeds, the debt-to-equity ratio is expected to improve to 1.11x.

As per the current shareholding structure, Lankem Developments PLC holds 67.45 stake in the company followed by 6.37 percent and 5.88 percent stakes by E.B. Creasy & Co. PLC and Secretary to the Treasury. 

Incorporated in 1992, Agarapatana Plantations Limited is a mono-crop, tea only plantation and is one of the largest plantation companies in Sri Lanka with 21 tea estates spread across the high-grown region of Agras Valley located in the Dimbula district of Nuwara Eliya and in the Uva district of Haputale. 

As  Agras Valley is bordering Horton plains, the company is also exploring potential tourism projects. Further, the company also plans to prmote Dambathale estate as a tourst detination with its links to Sir. Thomas Lipton. 
The company has a land extent of around 10,000 hectares with a mature extent of over 6,000 hectares for tea cultivation and around 1, 000 hectares of commercial timber cultivation.

The company has over 14 fully equipped factories which manufacture and handle the entire tea production process. Additionally, there are three factories that process refused tea.