MUMBAI, Dec 23: The Calcutta-based AFT Industries Ltd, formerly Assam Frontier Tea, has put on hold its plans to acquire a 74 per cent non-resident Indian stake in Empire Plantations (India) Ltd for the time being.

The acquisition was planned for Rs 39 crore. Its funding was scheduled to be made through a Rs 29-crore term-loan and the rest Rs 10 crore would have come from internal accruals and by liquidating inter-corporate lendings.

"The shelving of the acquisition plan has improved the company's liquidity position," analysts say. AFT's primary liquidity source is its operating cash-flow which would have come under pressure had the company gone ahead with its plans to acquire Empire Plantations.

AFT is the flagship of the Apeejay Surrendra group with an annual average production of around 14 million kg of tea. The company has nine tea gardens -- all located in Assam -- and ranks among the country's top tea corporates.

74 per cent stake that AFT sought to buy belonged to Swraj Paul, the London-based industrialist and Surrendra Paul's elder brother. With increasing craving for Indian tea in the Middle-East -- Iran and Iraq in the main -- as well as Pakistan and the CIS countries, demand is projected to outstrip supply which will, in turn, ensure that auction realisations remain at the current high levels till 1998-99.

"However, any disturbance in the major tea-importing countries may affect the domestic export market which will, in turn, affect the profitability of tea exporters", analysts say.

AFT's exports, which stood at just Rs 2.20 crore in 1995-96, increased nearly four-fold to Rs 8.30 crore in 1996-97. The company was successful in penetrating markets in Iran, Russia, Germany and the UK during 1996-97.

AFT's sale is largely restricted to the auction market.

During the first half of the current fiscal, auction realisations in the domestic market improved by over 20 per cent, compared with the previous year.

The first-half price realisation improved with lower production in Kenya and Sri Lanka and a 35 per cent drop in the global tea crop during the period. AFT has, however, decided not to venture into the high realisation area of the packet tea market. "We have decided to stay away as the economics do not work out in our favour at the current production level, given its high brand-building cost," says a source.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.