M K Shah Exports approaches McLeod Russel India lenders with counter offer

M K Shah Exports, one of the largest orthodox tea producers in the country, has reached out to lenders to McLeod Russel India (MRIL) with a proposal.

The move comes days after Carbon Resources, which is into manufacturing of input materials for ferro alloys, steel, and aluminium industries, sent a non-binding letter of intent (LoI) to McLeod bankers to settle dues and take a controlling stake in the tea producer. It also acquired a 5.03 per cent stake in the company from the open market.

Himanshu Shah, chairman of M K Shah Exports (MKSEL), told Business Standard: “We have sent a letter of intent to the banks. We want to infuse cash into the company and be a part of the restructuring process and collaborate with the promoters,” said Shah.

“For the sake of the tea industry at large, we would like to state our intention to collaborate with MRIL and its creditors to find a win-win-win-formula whereby the creditors, employees, MRIL as well as MKSEL benefit,” he said.

Shah’s contention is that tea estates should not be run by ‘outsiders’. Carbon Resources is a non-tea player and looking to diversify.

The industry is not defined solely by a tea estate’s bottomline, but by the number of people it employs, houses and feeds, pointed out Shah.

There are about 70,000 workers associated with MRIL, which has 31 estates in Assam and two in Dooars. The crop is about 44 million kg (mkg). 

In 2018, when McLeod was selling gardens to pare debt, MKSEL had purchased the Doom Dooma Circle Estates of McLeod comprising eight estates. “Some of the gardens were very good and some we have turned around,” said Shah.

With Shah’s move, an offer competing with Carbon Resources is now before McLeod lenders, apart from the debt resolution plan. It is understood that lenders met on Thursday.

Carbon Resources has offered an upfront payment of Rs 1,245 crore of an estimated outstanding bank debt of Rs 1,650 crore.

Sources in McLeod indicated that the debt restructuring plan that promoters had been discussing with banks was also on the table. “Ultimately, the banks will take a call,” the sources said.

The promoters of McLeod, Khaitans, have been discussing a debt resolution with the lenders for a while now. The process was paused when insolvency proceedings had been initiated against McLeod last year by a financial creditor and then restarted after settlement.

The company’s latest annual report mentioned that lenders had appointed independent professionals for carrying out techno economic viability study (TEV), which was re-vetted and confirmed. Valuation of tea estates were under process. And the committee formed by lenders had appointed credit rating agencies for assessing possible credit rating on implementation of the proposed resolution plan was also under process.