McLeod Russel Debt Restructuring with NARCL

Kolkata, Apr 16 (PTI) The promoter Khaitan family of McLeod Russel India Ltd has got a breather through a debt restructuring agreement with the National Asset Reconstruction Company Ltd, but revival of the tea producer remains challenging, officials said.

The agreement with NARCL, finalised on April 9, gave the company a three-year window to stabilise operations and avoid a distress sale of core assets, they said.

The company officials told PTI that management will again explore the induction of a strategic partner and the sale of tea garden assets in India and Africa.

In 2023, talks between McLeod and Carbon Resources for a strategic partnership had failed.

Under the agreement, the Aditya Khaitan-led management will service a "sustainable debt" of Rs 1,050 crore, payable to the state-owned NARCL by February 15, 2029, the officials said.

The deal entails around 10 per cent equity dilution and a pledge of promoter shareholding as a performance guarantee.

The company's 75.02 per cent debt is with the NARCL.

Despite the relief, analysts cautioned that the weak cash flows and mounting losses limit the company's ability to meet repayment obligations through internal accruals alone.

McLeod Russel's consolidated operating cash flow nearly halved to about Rs 29 crore in FY'25 (2024-25), while the company posted cumulative net losses exceeding Rs 460 crore over the past two years. The annual interest burden, estimated at over Rs 225 crore, further constrains financial flexibility, the analysts said.


In this backdrop, significant asset monetisation appears inevitable.

The analysts suggested the promoters may need to divest 15-20 of the company's 33 tea estates in India to raise funds.

Prime Assam gardens are valued at Rs 30-50 crore each, industry estimates suggest.

Alternatively, the company may consider monetising assets of its African subsidiary, McLeod Russel Uganda Ltd, the officials said.

The unit, which accounts for roughly 26 per cent of Uganda's tea output with six estates producing 21 million kg annually, remains a key asset but has faced profitability pressures, they said.

It reported a comprehensive loss of around Rs 28 crore in 2023 amid weak tea prices at the Mombasa auctions.

The company officials estimated that a full or partial sale of the Uganda business could potentially fetch Rs 300–400 crore, covering a substantial portion of the NARCL dues.

They stated that the details for spinning off the tea gardens are not finalised, and the company will evaluate all options.

While the conversion of a portion of debt into equity aligns the lender's interest with the company's turnaround, the pledge of promoter shares acts as a strong enforcement mechanism, the analysts said.

Meanwhile, the company is in talks with the lenders representing 24.98 per cent in debt value, including JC Flowers ARC and IndusInd Bank, to bring them under a broader resolution framework, they added.