Promoters of McLeod Russel pledge nearly all of their shareholding

The promoters of McLeod Russel, the tea-growing major which is a part of the Brij Mohan Khaitan-led group, has increased their pledge to nearly all of their shareholding in the firm. Of the total promoter holding of 38.74 per cent, the promoters have increased their pledge to 38.16 per cent. Only 0.58 per cent of their stakes now remains unpledged.

Moreover, the promoters’ holding in the firm declined to 38.74 per cent after Aditya Birla Finance (ABFL) sold 2,142,339 shares at the market price to the public. These shares were pledged to ABFL by Woodside Parks, a promoter group company, which had 4.31 per cent stake in McLeod Russel. After the sale, Woodside Parks’ stake has declined to 2.26 per cent, it informed the stock exchanges.

In separate regulatory filings with the BSE, the company said on April 30, another two promoter group companies pledged their shares. While Borelli Tea Holdings, had pledged its entire 16.34 per cent stake holding in McLeod Russel to IndusInd Bank; Williamson Magor & Co, which has a 11.16 per cent stakeholding in the firm, pledged 7.5 per cent of the stakes to the same bank.

McLeod Russel has been selling its tea estates to pare debt. Sources say a significant part of the debt is due for repayment in the next three to six months, keeping its liquidity under stress. As on end-March 2018, exposure to group companies was around Rs 650 crore; this rose to Rs 1,000 crore by end-March 2019, said the sources. A major part of this debt is short-term. McLeod's total debt as on March-end is around Rs 1,600 crore and the company has received Rs 940-950 crore from sale of gardens.

Accordingly, McLeod Russel faced a second credit rating downgrade this month. Icra downgraded its term loans and fund-based bank facilities from A-negative to BBB-negative. 

Prior to this downgrade, the agency had revised its credit rating and outlook on this company on April 2. Icra said, although McLeod used the proceeds from the sale of gardens to reduce debt, however, contrary to its expectation, the total debt remains high because of increased exposure to group firms. 

Icra also said McLeod’s input costs pressure was expected to keep the operating profitability of the company under pressure, despite the cost control exercises undertaken.