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McLeod Russel set to focus on Uganda, India estates after Vietnam exit

The company recently signed an agreement for selling its business in Vietnam to TLK Agriculture Joint Stock Company of Vietnam for $2.15 million

Bank moves NCLT to initiate insolvency proceedings against McLeod Russel
Ishita Ayan Dutt Kolkata
3 min read Last Updated : Oct 29 2023 | 6:35 PM IST
One of the largest bulk tea producers in the world, McLeod Russel will focus on India and Uganda plantations after an exit from the loss-making Vietnam venture.

The company recently signed an agreement for selling its business in Vietnam to TLK Agriculture Joint Stock Company of Vietnam for $2.15 million.

The Vietnam operations were under the fold of step-down subsidiary, Phu Ben Tea Company Ltd (PBTCL), and the deal is expected to be completed by December 24.

McLeod sources said Vietnam does not have its own auction system and excess supply in Africa has had a direct bearing on prices. “It’s at the lower strata of quality buying. If prices are low in Africa, then in Vietnam it’s even lower.” McLeod has three estates in Vietnam.

Kenya is the third largest producer of tea in the world, after China and India. Production in Kenya has been consistently up in the last few years, impacting prices. In 2019, Kenya’s production stood at 458.85 million kg, but has remained above the 500 million kg-mark since then. In 2022, it was 530 million kg.

The slide in prices has reflected on PBTCL operations. During 2022, the company incurred loss (both pre-tax and post-tax) of $2.91 million against loss of $4.51 million in 2021, leading to impairment in investment. Production during the period dropped to 0.63 million kg from 3.24 million kg in 2021.

Vietnam was part of a string of acquisitions by McLeod. In 2009, the company entered Vietnam by acquiring 100 per cent in PBTCL. A year later, it stepped into Uganda and then Rwanda in 2011.

The big acquisition, however, was in the domestic market in 2005. It had then gained control of over 17 estates under Williamson Tea Assam. Doom Dooma and Moran Tea followed in 2006 and 2007, respectively.

At its peak in 2013-2014, McLeod’s production stood at 112.23 million kg. But paring debt has been in focus for the last few years, leading the company to sell estates. 

The estimated tea crop from the McLeod stable in 2023 is about 69 million kg across India, Vietnam and Uganda. In FY20, it exited Rwanda.

The operations in Uganda are much larger than Vietnam, at about 21 million kg from nine estates. McLeod has indicated that the focus now would be on Uganda and India. In India, McLeod has about 33 estates with a crop of 43 million kg.

However, in August, McLeod reached an understanding with electrode paste maker Carbon Resources, owned by the Jalans, for sale of estates in India. It has been in discussion with lenders for debt resolution.

The deal size is around Rs 700 crore and would give Carbon 15 gardens with an estimated production of 17-18 million kg. It would help McLeod make the one-time settlement (OTS) payment to banks. McLeod is said to owe banks about Rs 1,600-1,700 crore. According to sources, discussions are expected to pick up after the festival break.

Even as the debt resolution is in the works, at least two banks have moved the National Company Law Tribunal (NCLT) for initiating a corporate insolvency resolution process (CIRP).

On Friday, McLeod said, in a filing with the stock exchanges, that the arbitration proceedings between Aditya Birla Finance and McNally Bharat Engineering Company had been disposed of by the sole arbitrator on October 26. It was on the joint application filed by the parties pursuant to the consent terms agreed and executed.


Topics :McLeod Russel IndiaTea productiontea gardenIndian tea industryTea ExportsUganda

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