For quick turnaround, McLeod Russel counts on lenders’ nod for revamp plan, sale of ‘good estates’

Shobha Roy Kolkata | Updated on August 03, 2019

Debt laden McLeod Russel India Ltd is hopeful that its restructuring proposal will be accepted by the consortium of lenders led by ICICI Bank. It is also exploring the possibility of selling three or four more of its gardens in Dooars and Assam to pare debt.

According to Azam Monem, Wholetime Director, McLeod expects a turnaround as it holds a number of “good estates” and the management is committed to the core business. “We are trying to explore all possible restructuring options and are hopeful that the lenders will support our proposal. We are hopeful of coming out (of this current situation), if our restructuring proposal is accepted by the lenders,” Monem told BusinessLine.

McLeod, part of the BM Khaitan controlled-Williamson Magor Group, has a total debt of around ₹1,500 crore as on date. The company is estimated to have an around ₹1,000-crore exposure to group entities, including Eveready Industries, McNally Bharat and Kilburn Engineering, which accounts for a major share of its debt.

The company recently rejigged its board and made top-level management changes.

The company’s auditor Deloitte Haskins & Sells LLP had noted that McLeod’s ability to continue as a going concern will solely depend on the acceptance of the refinancing proposal, which is not wholly within the control of the company.

However, Monem pointed out that a restructuring attempt undertaken in 2004 had helped the company make a turnaround then. This was also supported by an upswing in the tea industry after 2006.

The performance of the industry will be “crucial” to the company coming out of its present situation and servicing its debt. “Profitability is an important factor to be able to service debt. As of now the industry looks good but we need to see how long it holds,” said Monem.

Asset sale

The bulk tea producer had received shareholders’ approval in early 2018 to sell up to 35 per cent of its assets in India. As of March 2018, it had 52 tea estates in the country producing 67 million kg.

As of March 2019, it had sold 16 tea estates and entered into MoUs to sell another four to pare debt. While the company’s gardens in Assam fetched an average value of ₹350-356 a kg, those in Dooars fetched ₹205-207 a kg.

McLeod is looking to further monetise one or two gardens in Dooars and two in Assam by the end of this year.

Poor appetite

According to an industry observer, despite having “good gardens”, McLeod may not find a good buyer due to lack of appetite in the tea industry, which has been reeling under the pressure of high costs outstripping price realisations.

“They had got good valuation for the sale of their assets earlier, but this time around they may find it difficult due to their current financial position,” said the observer.

Published on August 03, 2019

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