In a couple of years we had gained palpable momentum. Many South India tea producers realised that JT was a professionally run organisation with well-trained executives, and was here to stay!
We had started offering finance to the Bought Leaf factories in the Nilgiris and now other tea producers who wanted to upgrade their factories were interested in finance from Brokers. They were not always altruistic in their intent, and easy cash from Brokers also went to finance losses, business expansion and other investments.
In cases where loans and advances were taken deductions would be made before paying out the ‘sale proceeds’. The Broker charged interest, usually 2% above Bank rate, and this amounted to a fairly good income. Brokerage, which was the core business, was only 1% for an incredible amount of services and so there was a pull for additional revenue.
Sometimes money was also given as outright loan. Loans were usually given against collateral security but the legal system took too long. There was however, an unwritten agreement among the Brokers that they would clear any outstanding before taking on an account from another Broker.
At the end of my forty years in tea I would say that financing by Tea Brokers led to unhealthy practices. Over the years this deteriorated to the extent that even those with no knowledge of the traditions of the tea trade or experience in Tea was granted a Tea Brokers Licence. In my early days of tea broking this would have been incomprehensible!
A major breakthrough for the Cochin branch came in 1967 when we signed a contract with Goodyear Tyre Company to source raw rubber for them. We needed someone with expertise and connections to enter this trade, and satisfy our principals – that we had the wherewithal to fulfil our obligations.
We found just the man in Joe Tharakan. He came from a prominent Catholic family and had good connections with the rubber planting community. Through him we were soon able to establish regular suppliers.
Rubber latex oozes as a viscous liquid from the tree, is harvested, made to coagulate, then rolled into sheets, and cured in smoke houses. The grading is done on the basis of purity. The sheet with the least impurity is almost translucent, and is called RMA1.
Most commodities need a ‘middleman’ to collect, coordinate, handle logistics and payments. We had a mutually beneficial association with Kottayam Rubber Company. We were able to procure our requirements which was sent to Goodyear’s Balabgargh factory in Haryana. Soon other tyre companies approached us to supply rubber but we declined with the exception of CEAT Tyres in Bombay.
Between Goodyear and CEAT we had a thriving business in rubber, adding muscle to our South India operations!
Weeds are a big nuisance in any plantation. It sucks up the fertilizer and nutrients that are applied for promoting plant growth. It is critical to apply weedicide to kill weeds and grass, but not the Tea or Coffee bushes!
An international brand called Roundup, sold by Monsanto Chemicals was available but it was said that this product made the soil toxic. Ansar, produced by a Bombay company, had the answer to this. They used less harmful chemicals and organic components in their weedicide. They approached us to market their product and we thought it would be a good addition as we saw synergy.
Satyanath had the right man for the job. K.N. Menon – Kuttappan or Kutts to his friends – was a close family friend from Trichur, with good connections and the gift of the gab! He was a bachelor, so traveling on work was not a problem. He was also good company with a great sense of humour – always an asset at any party. This operation began in 1973 by which time I had opened the JT Coonoor office. Kuttappan set up his marketing office there and was a great help to me.
Another diversification by JT in the 70’s, however, nearly shipwrecked the company. Someone brought a proposal for the purchase of two cargo vessels. These were medium size ships that could be hired out for hauling cargo on coastal routes. JT had nil expertise in this line of work. It was a large amount of money too which was financed by selling shares and through Bank loans. The company hypothecated their crown jewel, Nilhat House Calcutta, as collateral security for these loans. A fair chunk of the Promoter’s quota was distributed to all of us in the company. Satyanath gave me a large number of shares and suggested that I place them with my Coonoor clients. I was loathe to do this and instead placed them with my family, and bought quite a few shares myself. I knew little else other than tea tasting and tea broking at the time. It did not occur to me that I should have done some ‘due diligence’ before placing these shares with my family or anyone else for that matter.
These ships were old and in need of repair. We had hired a couple of retired Indian Navy officers to captain the ships but these people knew little about the ‘business’ side of shipping. The JT Board also had no domain knowledge. Everyone relied on someone else – numbed by a sense of euphoria due to the success of our tea broking and subsidiary operations.
Suffice it to say that after a decade or so of struggle, Nilhat Shipping Company sank to the bottom of the sea! We just tore up the share scrips that were occupying space in our Safes and threw them into the waste paper basket. It was embarrassing for me to face my relatives. I was also financially singed by this loss.
At one stage Nilhat House itself was in jeopardy. I am sure that the Board and particularly the Chairmen, would have agonised over this during their term in office. In the end the company was able to save Nilhat House, though not the shipping company.
Carritt Moran, whose office was the erstwhile residence of Warren Hastings* in Calcutta, had started operations in the late 18th century, a few years after J. Thomas. They were the No.2 Tea Broker on the planet. Carritts looked at what big brother JT was doing next door and went into new businesses without understanding the length and breadth of what was required. Sadly this historic company had to close down and go into liquidation after 131 years in business, which was a matter of shock and sadness to the tea trade and the tea planting community as a whole.
The moral of the story is – service companies should stick to businesses where they have core competency, otherwise they could be swept away by a slight turn in the tide! Going after a business about which we don’t have much know-how will jeopardise our existing business. It will create great financial stress and inadequate attention will be given to the core business – which had brought in good income earlier.
But we’ll talk some more about these things in later episodes.
*Warren Hastings along with Robert Clive, laid the foundation of the British Empire in India.