The valuation of McLeod Russel’s tea gardens at Rs 340-Rs 350 a kg has rekindled hopes for a good deal for the beleaguered estates of Assam Company India Ltd, which is undergoing insolvency proceedings in the Guwahati bench of the National Company Law Tribunal (NCLT).
Sources suggest that the quality of gardens of both these companies are “inherently good.” However, Assam Company’s tea estates have been in a state of neglect owing to years of stress on the company’s revenues and margins.
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Prospective buyers like MK Shah Exports, Dhunseri Tea & Petrochem and others had previously stated that owing to this ‘neglect’, the valuation of Assam Company’s gardens may not be as high as McLeod’s, whose gardens are operational.
“However, the sale of McLeod’s estates recently has set a pricing benchmark for the industry and clarity is emerging on valuation of gardens,” said Himanshu Shah, chairman of MK Shah Exports, which has evinced interest in buying the 14 tea estates of Assam Company.
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MK Shah Exports has been interested in buying the assets of Assam Company but was disqualified by the Resolution Professional (RP) with regard to monetary eligibility conditions.
After a series of litigations in the NCLT, the company moved the National Company Law Appellate Tribunal (NCLAT) where hearing of the case is slated to be held next month.
Meanwhile, MK Shah Exports entered into an initial agreement with McLeod to buy eight high-quality gardens in the Doom-Dooma region of Assam at a valuation of Rs 340 a kg. Asked if he is still interested in Assam Company, Shah said, “At the moment, we have not taken a decision and we are still doing research on the garden valuation, including its tangible and intangible values. Our decision also depends to a large extent on the outcome in NCLAT.”
Sources suggested that the buyers had previously estimated the valuation of Assam Company’s gardens to be around Rs 275 a kg while some of them had rated it even lower.
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However, after the recent sale of 12 gardens of McLeod in Assam this month, interested buyers are ready to shell out between Rs 325 and Rs 340 a kg.
However, sources said there is a major problem which Assam Company is facing. Although MK Shah Exports and James Warren Tea are ready to pay more for buying Assam Company’s gardens, they have been disqualified by the RP on monetary grounds.
A Rs 50 million earnest money and also Rs 500 million cash and cash equivalent in hand, are some of the crucial pre-conditions for a company to make a bid.
These two companies had challenged the eligibility criteria individually but the Goodricke Group backed out after initial interest. After James Warren Tea had moved the NCLAT last month, it had allowed the firm to bid while MK Shah Export’s fate is still undecided.
T. Kannan, the RP, said that the eligibility conditions have been formulated to keep off smaller buyers, which may not be able to manage Assam Company. “Invitation of financial bids has opened and the will end on June 21”, he said.
Seven companies including the diversified Apeejay Group, Luxmi Tea, Dhunseri Tea & Petrochem, NRI businessman Purnendu Chatterjee -owned The Chatterjee Group, asset reconstruction companies including Arcil Asset Reconstruction Company and Suraksha Asset Reconstruction are currently evaluating the assets based on which they are likely to place their resolution plans.