McLeod Russel hits 52-week low as lenders start invoking pledge

In a regulatory filing with BSE, McLeod said during June 10-11, 3,800,000 shares of the company, representing 3.64% of the company's share capital has been invoked against a total loan of Rs 400 cr

Shares of McLeod Russel tumbled on the bourses to a 52-week low of Rs 24.25 apiece after Vistra ITCL, a debenture and security trustee, invoked 3.64 per cent of the shares, the Williamson Magor Group (WMG) company had pledged with it.

In a regulatory filing with the BSE, McLeod said during June 10-11, 38,00,000 shares of the company, representing 3.64 per cent of the company’s share capital has been invoked against a total loan of Rs 400 crore. These loans were issued to Williamson Magor & Co, Williamson Financial Services and Babcock Borsig Ltd – all of which belong to the promoter group.

The alteration in the company’s shareholding pattern could not be ascertained immediately. However, last month, the promoters held 38.74 per cent in the company with nearly all of their shareholding pledged with lenders.

In the last one year, the company’s scrip tanked by 82.39 per cent on the BSE, closing at Rs 24.25. A year ago, its shares stood at Rs 137.70 apiece.

In the past few months, amidst ratings downgrade, lenders have been invoking their pledge in McLeod, which once held the crown as the world’s largest tea producer. 

In May this year, Aditya Birla Finance (ABFL) sold 2,142,339 shares at the market price to the public, followed by a second tranche of sale, which resulted in the promoters’ holding in the company falling to 38.39 per cent from the earlier holding of 42.71 per cent. 

On the other hand, in a bid to pare debt of Rs 1,600 crore, McLeod has been selling estates and so far is estimated to have received Rs 940-950 crore from sale of gardens.

However, amidst these woes, it faced two ratings downgrades last month. While ratings agency ICRA downgraded the firm’s term loans as well as fund-based bank facilities from ICRA A to ICRA BBB, with a negative outlook, non-fund based bank facilities have been revised from ICRA A2+ to ICRA A3.

According to ICRA, the rating revisions have factored in further deterioration in McLeod’s liquidity profile due to a slower-than-anticipated progress on asset monetisation and continued pressure on the profitability of the core tea operations of the company.

Meanwhile, another WMG company, Eveready Industries faced a ratings downgrade from India Ratings and Research (Ind-Ra) which downgraded Eveready’s Long-Term Issuer Rating to IND BBB from IND A+ and maintained a Negative Rating Watch on this company.

Ind-Ra reasoned that the company’s debt increased to around Rs. 384.8 crore as against the debt of Rs. 246.1 crore in the last fiscal year and loans and advances to the group companies (including interest outstanding) stood at Rs. 292.8 crore which led to deterioration in the net leverage of the company.

“Promoters plan to undertake deleveraging at other group companies through asset sales, and are also exploring fund raising by stake sale in Eveready to deleverage the holding company. Any substantial delay in the company’s asset monetisation plans and/or further extension of support to the group companies or invocation of guarantees/post-dated cheques would be negative for the ratings”, Ind-Ra said.