McLeod sells 6 more gardens; courting Alibaba, others to sell tea online

In its fourth tranche of sales, McLeod Russel, which is on a selling spree of its tea gardens, has signed agreements to sell off two estates in Dooars in West Bengal and four estates in Assam for a total consideration of Rs 2.32 billion.

In Dooars, the Chuapara and Jainti Tea Estates including Chuniajhora Tea Estate, whose produce is processed in the Jainti Tea Estate, are being sold to Civil Engineers Enterprises, a non-tea firm. In Assam, the Addabarie, Dirai, Mahakali and Rajmai Tea Estates are being sold to Saffron Enclave, another non-tea firm.

These estates in Assam, which are currently undergoing the process of due diligence as part of the sale procedure, contributed around 2.66 per cent or Rs 970 million to McLeod’s total turnover and are being sold for Rs 1.81 billion. On the other hand, the estates in Dooars account for 2.69 per cent of McLeod’s total turnover at Rs 420 million and are being disposed of at Rs 516.2 million.

In the last three tranches of sales so far, this WMG enterprise has sold two tea estates in Assam to Camellia Plc-owned Goodricke Group for Rs 912.9 million, four estates in the Moran region in Assam to Luxmi Tea for Rs 1.41 billion and another eight estates in the Doom Dooma region in Assam were offloaded to M K Shah Exports for Rs 3.31 billion.

On a divestment mode to pare debt, fund a share buyback, and raise capital to fund its recent decision to foray into packet tea segment, McLeod Russel now aims to pocket Rs 8 billion as the sale proceedings from its tea estates. Previously, the company had targeted to raise Rs 5 billion from sales.

In its annual general meeting this year, the company’s shareholders approved the sale of additional tea estates exceeding the initial target.

According to Kamal Baheti, director at McLeod Russel, shareholders’ nod is needed for the company to execute sales that exceed 20 per cent of the value of fixed assets. Under the proposal, the company has suggested offloading a maximum of 35 per cent of its fixed assets, which translates into Rs 7 billion. Its standalone fixed assets amount to about Rs 20 billion, while the total assets account for over Rs 33 billion. These figures exclude tea gardens from Vietnam and Africa.

While it has taken shareholders’ approval for the sale of 35 per cent of its fixed assets, the sales so far account for around 30 per cent of the total approval taken from the stakeholders, leaving room to sell more tea estates.

Sources said McLeod is also in talks with Dhunseri Tea & Industries and James Warren Tea which may lead to the fifth tranche of sales.

The firm is also in talks with Alibaba and other e-commerce companies to launch packet tea on the online platform globally.