Tea firm McLeod Russel expects final debt restructuring plan in few months

Bankers support the company as it engages with them 'very consciously', says CEO Aditya Khaitan.

McLeod Russel India, the country’s largest bulk tea producer, expects its debt-restructuring plan to be finalised in the next few months.

McLeod owes banks about Rs 1,800 crore and with unpaid interest, the total amount is said to be around Rs 2,300 crore. Bankers are fully in support of the company as it engages "very consciously" with them for a restructuring plan, said Aditya Khaitan, McLeod Russel chairman and managing director, while responding to shareholders' questions at the firm’s annual general meeting.

“Hopefully, in the next few months, we will be able to finalise the restructuring programme with the bankers and with that the company should be able to manage its debt position,” said Khaitan.

The company had last month in a stock exchange filing said that all banking lenders had signed/executed an Inter Creditor Agreement (ICA) to provide for ground rules for finalization and implementation of resolution plan.

McLeod had been in discussion with bankers for debt resolution in terms of the Reserve Bank of India’s (RBI’s) June 7, 2019 circular for a while. The process was restarted by bankers after insolvency proceedings initiated by a financial creditor was withdrawn in September.

In the notes to September quarter results, the company had said that the Techno Economic Viability (TEV) study and valuation done are being vetted again and possible credit rating of the parent will then be obtained in due course of time.

The draft resolution plan prepared earlier by SBI Capital Markets Limited along with their recommendation concerning resolution plan will accordingly be modified in terms of ICA and placed before the bankers for their consideration, it had said then.

On the operations side, Khaitan said at the AGM that he was expecting the next season in April to open on a strong note. Tea production was higher than last year but consumption over the last two years had built up a shortage.

Tea companies saw a record surge in prices in 2020, rising on the back of lower crop due to the shutdown of estate operations as fallout of the Covid-19 pandemic. It resulted in an average increase of 34 per cent in Indian auctions in 2020 over 2019.

However, prices were lower this year with higher production compared to 2020. Khaitan said all the cost increases that were to happen had happened. The wage increase had been finalized by the governments of Assam and West Bengal.

“Hopefully, we believe that all the cost increases that needed to happen, have happened and the market is also ready to pay a higher price for the tea product,” he said.

Khaitan reckoned that the price gap between good quality and medium and low quality tea will be maintained.