Talks fail, Jalan-owned Carbon Resources sells stake in McLeod Russel

Electrode paste maker Carbon Resources, owned by the Jalans, has exited McLeod Russel India, the country’s largest bulk tea producer, by offloading its five per cent stake in the open market.

Over the past week, Carbon Resources had been selling shares in the Brij Mohan Khaitan tea company in small tranches. “Today, we sold more than three per cent,” Abhinav Jalan, director, Carbon Resources, said, adding that “every share has been sold”.

Explaining the rationale, he said, “We had a meeting with the Khaitans after the company came out of NCLT. They wanted to renegotiate our deal on different terms, which was not acceptable to us.”

“We also believe that the current OTS (one-time settlement) offer by the Khaitans to the banks is too low. So, banks may drag the company to NCLT in which case our shares would have become worthless,” Jalan said.

Jalans’ cost of acquiring 5.03 per cent was about Rs 15 crore and they realised about Rs 11 crore from the sale.

Sources close to the Khaitans said the OTS offer was still in the works. “The figure has not been finalised in this matter. Since the exclusivity factor in our agreement with Carbon got removed, we are talking to other people to get the best price,” they said.

“We have no issues working with Carbon or anyone else,” the sources added.

But Jalans appear to have gone back to refreshing the intent of taking over McLeod. “We would prefer to take over the company if it goes to NCLT and offer banks Rs 1,150 crore for it,” Jalan said. McLeod’s bank debt is believed to be in the region of Rs 1,600 crore.

In the last nine months, however, the Carbon-McLeod story has changed course more than once.

The Jalan company — with interest in manufacturing inputs for ferro alloys, steel and aluminium industries — in a surprise move had picked up 5.03 percent stake in McLeod last September. It had also made a non-binding offer to McLeod lenders.

The move came at a time when promoters of McLeod Russel were in debt restructuring discussions and prompted lenders to request the Khaitans to consider an OTS.

In January, McLeod announced that it had entered into an agreement with Carbon to “exclusively discuss, negotiate and evaluate a mutually agreeable mechanism for the company to offer a proposed one-time settlement of the debt owed by the company to its identified lenders”.

The agreement was for 60 days. But in the interim, insolvency proceedings were initiated against McLeod by IL&FS Infrastructure Debt Fund, making the agreement with Carbon infructuous.

“We had earlier agreed to pay Rs 750 crore for tea gardens, which would have gone towards the OTS. But once out of NCLT, they were seeking a higher amount for the same set of properties. That was not okay with us,” Jalan said.

McLeod’s estimated crop is about 42 million kg (mkg) across 31 estates in Assam and two in Dooars. The total production is about 69 mkg across India, Africa, and Vietnam.