India’s largest bulk tea producer McLeod Russel India Ltd, promoted by the Calcutta’s Khaitan family, crossed a milestone in its six-year-old quest for debt resolution after all banks, saving one, assigned their loan to National Asset Reconstruction Co Ltd (NARCL).
The tea producer, which has 33 gardens spread mostly in Assam and a few in Bengal, will now have to deal with three entities, two asset reconstruction companies (NARCL and JC Flower) and IndusInd Bank, going forward, paving way for potentially faster resolution of its festering debt.
McLeod has an outstanding debt of ₹1,461.06 crore (principal amount) with 10 lenders, including nine scheduled commercial banks and JC Flower ARC. All banks in the consortium led by ICICI Bank, such as HDFC Bank, SBI, Axis Bank, RBL Bank, Indian Bank, PNB and Indian Bank have assigned their loan/financial assets together with all underlying securities, guarantees, rights, title and interest in respect thereof to NARCL.
IndusInd Bank, which itself is in trouble over asset liability-mismatch, has only ₹71.66 crore exposure in the form of unsecured loan. The Telegraph had earlier reported that NARCL had approached the consortium led by ICICI Bank to take over their combined outstanding debt of ₹1,104.69 crore for ₹700 crore. It is not yet known how much NARCL paid to take over the residual debt (₹1,033.03 crore), sans IndusInd, but it is likely to be in the region of ₹650-670 crore.
IndusInd, like many other lenders, had filed a bankruptcy case against McLeod with the Calcutta bench of the National Company Law Tribunal.
Sources in McLeod suggested that the focus would now shift to find a sustainable resolution to the outstanding debt. For the debtor McLeod, the outstanding loan remains the same irrespective of the price ARC paid to take over the debt from creditors.
However, the company management, led by chairman and managing director Aditya Khaitan, is likely to have more breathing space to find out a solution and not be pressured to part ways with its assets.
The company had presented four restructuring proposals to lenders since 2018 without success, primarily due to lack of unanimity among creditors. The proposals included a one time settlement, backed by Calcutta-based electrode paste maker Carbon Resources which had offered to buy roughly half of McLeod’s gardens for upfront cash. McLeod’s debt woes are linked to loans and advances made by it to group firm McNally Bharat Engineering, which has since gone bankrupt.
A new resolution would now have to work out keeping in mind the vagaries of the tea business which has been on a steady slide due to lack of remunerative price amidst surge in supply from small growers.
The season of 2025 is starting with a good weather forecast which indicates the crop is likely to be good and prices down.
