McLeod Russel India lenders likely to discuss Carbon Resources proposal

Lenders to McLeod Russel India will meet shortly to discuss a proposal from Carbon Resources to clear outstanding debts of banks and take charge of the company.

On Friday, the Jalan family-owned Carbon Resources Private Limited sent a non-binding letter of intent (LOI) for debt resolution of McLeod Russel and acquiring a controlling stake in the country’s largest bulk tea producer.

Sources close to the development said that the meeting was likely over the next couple of days.

The contours of the proposal are like this: of an outstanding bank debt of Rs 1,650 crore, the upfront payment being offered is Rs 1,245 crore. The amount includes Rs 300 crore of equity infusion by Carbon Resources and Rs 945 crore of fresh debt. Secured lenders would be paid in full and the balance would go towards paying unsecured lenders.

“We have sent a fair offer, now it’s for the banks to decide,” said Abhishek Jalan, director, Carbon Resources.

The fresh debt is likely to be raised on the books of McLeod Russel. The company has proposed to complete the entire transaction, including due diligence, within 60 days.

“We have only seen it from the outside. We need to see all the other details and do the due diligence,” Jalan pointed out.

But for the past one and a half months or so the Jalans have been busy doing their homework on the tea industry; the offer for McLeod has been in the making for three weeks. In fact, they had looked at other assets in the tea industry, but size matters and they finally zeroed in on the largest in the industry.

A quick flurry of events — the acquisition of a 5.03 per cent stake in McLeod and the non-binding offer to the banks — has put the under-the-radar company, Carbon Resources, in the spotlight in the past few days.

A hardcore B2B company dealing in input materials for the ferro alloys, steel, and aluminium industries, Carbon Resources was started by Suresh Jalan in 1991 with a unit in Giridih, Jharkhand. The major part of the growth, however, has come about in the last decade or so.

“The second unit — calcined petroleum coke (CPC) — was an acquisition in 2005 in Bihar. Then, a greenfield CPC unit was set up in Assam in 2011-12. And a fourth unit, electrode paste, was set up in 2021 in Andhra Pradesh,” said Jalan.

CPC and electrode paste are consumed in steel, graphite electrode, aluminium, and ferro alloy industries. The company also trades in manganese ore, steam coal and anthracite, among others.

Last year turned out to be a good year for the company. It clocked in a total income of Rs 2,415.96 crore, up 183 per cent over the previous year; profit at Rs 268.19 crore jumped by 532 per cent on the back of higher realisations and capacity addition at the Andhra Pradesh unit.

This year, too, the topline is expected at a similar level, said Jalan.

The operations of the company are streamlined and at the helm are Suresh Jalan and sons, Abhinav and Abhishek.

But the company is looking to diversify and currently the focus is on getting the McLeod proposal through. “The way we have structured the offer is very good. And the gardens are lovely; there is not much to turn around. Its only problem is debt,” said Abhishek Jalan.

The ball is in the banks’ court. But whichever way it decides, in the staid world of tea, Jalans have surely caused a stir.