Debt-laden McLeod Russel India Ltd (MRIL), part of the Willamson Magor Group, considers its decision to lend to group company — McNally Bharat Engineering Company Ltd — a “mistake”.

The company, which has a total outstanding debt of over ₹1,700 crore, is banking on acceptance of its restructuring proposal by the consortium of bankers to be able to turnaround.

According to Aditya Khaitan, Chairman and Managing Director, McLeod, SBI Caps has been appointed to carry out a comprehensive restructuring of the company’s debt. The restructuring proposal would include conversion of short-term loans into long-term loans and reduction of interest rate, among others.

Inter-corporate deposits

McLeod had given inter-corporate deposits (ICDs) to some companies (including promoter group companies) and the closing balance of such deposits stood at ₹1,745 crore as on March 31, 2019. The interest accrued and unpaid on such deposits stood at around ₹77 crore. Exposure to group entities accounts for a major portion of the company’s debt.

“In hindsight today, yes, it was a mistake. The company that was lent to was in serious trouble and one of the mistakes was that we wanted to see whether that company could be turned around,” Khaitan said responding to shareholders’ queries on the company’s exposure to group companies, particularly McNally Bharat, at the Annual General Meeting here on Monday.

McNally Bharat is an engineering company engaged in providing turnkey solutions in the areas of power, steel, aluminium, material handling, mineral beneficiation, coal washing, cement, oil & gas, civic and industrial water supply. “The company was in the infra space, we believe that India is a country that will require infrastructure and it is something that we felt could be the next business and growth engine for the group,” Khaitan said explaining the rationale behind lending to McNally Bharat.

However, the time it took for the company to revive and grow has taken a toll on the company and the group, he added.

In its rating rationale released in October 2018, Brickwork Ratings said that McNally’s total debt was around ₹3,282 crore as on March 2018 and its networth was ₹134 crore.

“The family and the company have made it very clear that we are not going to hang around…….. and to show the commitment we are in the process of restructuring the entire group and are in the process of disposing assets so that the money can be brought back,” he said.

McNally, which is also undergoing a restructuring process, recently entered into a non-binding agreement with a consortium of investors led by Hyderabad-based Turbovent Industries.

As per the MoU, the investor, subject to due diligence, would be willing to invest around ₹150 crore subject to approval and implementation of an appropriate resolution plan between the company and its lenders.

“Fresh lending to McNally was stopped almost a year ago and now the company is on its own, it is going through its own restructuring and looking at strategic investors coming into the company and EoI has already come in,” he said.

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