The Hindu Business Line : Mcleod Russel raises Rs 118 cr through QIP to repay debt

Mcleod Russel has raised Rs 118 crore through qualified institutional placement. The money will be predominantly used for repayment of debt. Mr Aditya Khaitan, Managing Director of Mcleod Russel, gives the details of the QIP and the use of the proceeds.

Mr Khaitan said that the company is looking at properties in Assam and Kenya for expansion purposes. He further adds that tea prices are expected to be much higher next year.

Excerpts from CNBC-TV18's exclusive interview with Mr Aditya Khaitan:

You had an enabling resolution for about $30 million, you have raised a little under that, does that complete your target for this year?

I think that does complete our target for the year as we had started off in July when we sold a certain part of our stake to Capital International.

At that time, we had said that our intention was to raise approximately Rs 200 crore and we have done that by picking up Rs 118 crore through the QIP.

We had raised about Rs 52 crore earlier by strategic sales to Capital. Our internal accruals this year-end (March) should be about Rs 50 crore. So I think we are very much in lines with what our roadmap was, of reducing Rs 200 crore of debt.

Post QIP, what does your debt status stand as of now and how much of a reduction can we see?

Our debt equity ratio earlier was 1:1. But after this, it will be 0.4:1 and this year with reduction of about Rs 200 crore of debt, our debt on a consolidated basis stands at around Rs 350 crore, out of which Rs 220 crore is our working capital.

Next year, once we complete the Rs 100-crore of term debt, we will become practically debt free.

Take us through the kind of equity dilution these placements have led to and given the kind of uptake that you have seen in the core business of tea, on an EPS basis what can you expect to deliver?

Keeping the fact that we are looking at a positive uptrend in the tea prices, it is very difficult to really predict. From last year to this year, we are running at about Rs 10 a kg higher in sales realisations than last year.

For us, with a high fixed cost business, every increase in sale price of Re 1 reflects in the bottomline. So this year, with the Rs 10 increase in sale price, we are raking in about Rs 70 crore, which will go directly to the bottomline.

Going forward, we feel that the market is going to react and I would say repay the good quality of tea that is being produced and next year, we tend to see a much higher price realization.

Do you plan to go ahead with further acquisitions in the near term?

We are looking at properties in Assam as well in Kenya and hopefully if something comes along, we will be the first one.