McLeod Russel looks to sell estates to pay down debt

Workers pluck tea leaves at a garden in West Bengal’s Darjeeling district. In the nine months till the end of December, McLeod Russel’s finance cost had gone up to Rs121.67 crore from Rs88.19 crore in the same period a year earlier—a jump of 38%.

Workers pluck tea leaves at a garden in West Bengal’s Darjeeling district. In the nine months till the end of December, McLeod Russel’s finance cost had gone up to Rs121.67 crore from Rs88.19 crore in the same period a year earlier—a jump of 38%.

Kolkata:After years of chasing growth through acquisitions across the world, McLeod Russel India Ltd—the world’s biggest tea plantation firm—is looking to sell some of its estates in Assam in a bid to pay down its debts.

The firm has signed non-disclosure agreements with a number of potential buyers to explore the sale of up to five gardens, according to three people familiar with the development, who asked not to be identified.

When contacted, a spokesperson for the Williamson Magor group, which controls McLeod Russel, declined to comment saying that the company does not, as a policy, comment on speculation.

In the nine months till the end of December, the company’s finance cost had gone up to Rs121.67 crore from Rs88.19 crore in the same period a year earlier—a jump of 38%.

Its latest debt level is not known but at the end of March 2017, McLeod Russel had Rs790 crore of loans on its books, of which Rs695 crore was secured, or received against mortgage of assets.

Along with its overseas arms, the company currently owns 63 estates, and in fiscal 2016-17 produced 115 million kgs of tea. It has 48 estates in Assam and four in the Dooars region of West Bengal, which in fiscal 2017 produced 78 million kgs and 5 million kgs of tea, respectively.

Last year, the company had sold its Bhatpara Tea Estate in Dooars for Rs13.2 crore, in an effort to restructure its portfolio.

Kamal K. Baheti, chief financial officer and whole-time director, had then said McLeod Russel was looking to rationalise its portfolio by seeking investors for estates with “low contribution”, in terms of output and profitability.

McLeod Russel is willing to sell its estates in the Dooars region as well, but there isn’t much interest in them, according to the people cited above.

Mumbai-based MK Shah Exports Ltd is said to be the frontrunner to snap up some of the estates on the block, according to these people. When contacted, its chairman Himanshu Shah said: “If McLeod Russel is looking to sell some of its gardens and they come at a good price, we will be interested.”

MK Shah has been looking to expand in Assam, where it now has five gardens. The firm has bid for the estates of Assam Co. India Ltd, the country’s oldest and most prized tea company, which is undergoing insolvency resolution on the watch of the Guwahati bench of the National Company Law Tribunal.

McLeod Russel has been on an expansion spree since 2005 when erstwhile partners, the Khaitan and Magor families, struck a deal in London to sell Williamson Tea Assam Ltd. The late Deepak Khaitan, who was vice-chairman of the group, had led that acquisition.

Since then, his brother Aditya Khaitan, who is the current vice-chairman of McLeod Russel, has expanded the company into new territories such as Uganda, Rwanda and Vietnam.

“Timing is of essence here,” said an industry expert, who, too, asked not to be named. It is known that McLeod Russel did not bid for the estates of Assam Co., which is an indication that it is no longer pursuing growth in India.

The proposed change in wage rates for plantation workers is weighing down heavily on the entire industry, and McLeod Russel appears to be in a hurry to close the transactions before things head further south and valuations are impacted, according to this person.

First Published: Thu, May 17 2018. 09 58 PM IST

Source: Livemint