Currently, there are too much uncertainty surround tea companies and it would be best to stay away. Here is why! Tea companies have had a variety of problems in the last couple of years. For example, most tea companies have been unable to move up the value chain and are still in the plantation business. Also, most of the team companies are facing law and order problems in the hills of West Bengal and that is also taking its toll on the tea companies.

You must have seen one of the largest tea companies post a loss of Rs.142 crore in the last quarter under cost pressures and weak demand. But the biggest factor that has spoilt sentiments around team companies has to do with Iran. That is very important currently and you need to understand that a little better.

India had a rupee account trade agreement with Iran to avoid the sanctions imposed on Iran by the US. The way it worked was that the payments for oil were paid in rupees into a rupee account in UCO Bank. India exported close to 3 million tonnes of tea to Iran and this money was adjusted against oil payables and paid to the tea companies.

After May 02nd, the situation has become tighter because most shipping companies are unwilling to ship tea to Iran for fear of sanctions. Apart from losing a lucrative and large market for tea, Indian tea companies are also not sure of the payments from the tea that is already supplied. It is this uncertainty that is really weighing on the Indian tea companies. There appears to be no short term solution to this problem and hence it would be best to stay away from the tea companies for now.