ICD provisioning drags McLeod Russel to loss of Rs 1,078.27 crore

Hit by provisioning for outstanding inter-corporate deposits (ICDs), McLeod Russel India, the country’s largest bulk tea producer, posted a consolidated net loss of Rs 1,078.27 crore in the January-March quarter (or Q4FY23). In the year-ago period, net loss had stood at Rs 192.93 crore.

The provisioning was part of cleaning up the balance-sheet, McLeod sources said. In the notes to results, the company said that provision of Rs 919.42 crore was made against ICDs including interest given to promoter group and certain other companies. Provision of Rs 14 crore was made against advance given to a body corporate.

Revenue from operations in Q4FY23 stood at Rs 226.04 crore as against Rs 254.24 crore a year back. For full FY23, revenues stood at Rs 1,369.57 crore compared to Rs 1,355.83 crore in the previous year. Net loss was at Rs 1,056.50 crore on account of the provisioning. In the year-ago period, net loss was at Rs 180.92 crore.

The company said that the outstanding amount on ICDs aggregates to Rs 2,761.74 crore as at March 31, 2023. Further, interest of Rs 99.41 crore on the amounts accrued upto March 31, 2019 and remained unpaid as on March 31, 2023.  

These borrowing companies which in turn advanced the amount so taken by them to other entities including one of the promoter group company which is under Corporate Insolvency and Resolution Process (CIRP) as per the Insolvency and Bankruptcy Code, 2016 (IBC) are in the process of recovering these amounts, McLeod mentioned.

It may be mentioned that the group company undergoing CIRP is EPC firm, McNally Bharat Engineering Company Limited.

However, the claims made by the borrowing companies pursuant to CIRP had not been fully acknowledged and the amount as admitted by the resolution professional (RP) was substantially lower.

The company said, considering the amount so far accepted by the RP in respect of the claims made by the companies, valuation indications, eventuality of recovery in this respect and resultant net worth of these companies, provision of Rs 1,010.39 crore (including Rs 90.97 crore provided in earlier years) on lumpsum basis without prejudice to the company’s legal right to recover the amounts given by it, had been made in the consolidated financial results.

This includes provision of Rs 99.41 crore (including Rs 79.99 crore provided in earlier years) provided against interest accrued upto March 31, 2019 which has been fully provided for in the financial results, the company said.

Further it said, the management believes that the outstanding dues, net of provision there against shall be recovered/adjusted and/or restructured depending upon the outcome of the recovery proceedings pursuant to CIRP or otherwise and completion of the resolution process of the company.

Debt restructuring

The company mentioned in the notes that bankers have reinitiated the resolution process for McLeod in terms of the Reserve Bank of India (RBI) circular dated June 7, 2019 after the company came out of CIRP.

Lenders had requested for submission of a proposal for one-time settlement of their dues and thereby an exclusivity agreement with Carbon Resources had been entered into by McLeod. However, the exclusivity agreement expired on February 28 during CIRP proceedings, McLeod informed.

McLeod said that the management was confident that with the bankers support in restructuring/settlement of their debt to a sustainable level and resultant rationalisation of cost of borrowing and other costs, induction of additional fund in the system by sale of assets or otherwise etc and other ameliorative measures taken and/or proposed to be taken, it would be able to generate sufficient cashflow to meet its obligations and strengthen its financial position over a period of time.