The Brij Mohan Khaitan group's McLeod Russel, which is India’s largest tea growing company, may have to alter its debt repayment and restructuring plan after its shareholders defeated a proposal to raise borrowing and lending limits beyond legally permissible norms.
The firm's shareholders voted against all the four special resolutions of McLeod Russel, part of the Williamson Magor Group, at its 21st Annual General Meeting (AGM) on Monday.
The company, in its explanatory statement, said a debt restructuring process was underway to convert short-term debts into long-term ones, exceeding legal provisions.
Hence, the resolution was placed before shareholders in a bid to bypass the legal clause. A company official said the defeat of the resolutions would not have any impact on the restructuring plans as debt restructuring was planned at the group level. If one route of raising money to clear the debt hits a roadblock, other group entities can pitch in to raise funds, the official pointed out.
At the company's AGM, Aditya Khaitan, chairman of McLeod Russel, had said a group-level restructuring was underway, involving debt recast, sale of assets and inducting strategic investors.
There have been several instances in the past few years when shareholders have voted against special resolutions, said Sriram Subramanian, founder and managing director of corporate governance advisory firm, InGovern Research Services. The issues proposed for shareholders’ vote are company-specific, he pointed out. "Defeat of such resolution shows that shareholders are not accepting the management thinking and actions, and that they want change,’’ according to Subramanian.
British American Tobacco had blocked ITC’s special resolution to issue employee stock options scheme, prompting the company to come up with a cash-settled employee stock appreciation rights scheme.
Also, at an extraordinary general meeting in March, Basant Kumar Jhawar, chairman emeritus and a co-founder at Usha Martin, was voted out from the board of directors by the other warring faction and public institutions. The second special resolution that was not accepted was to increase McLeod’s lending capacity beyond legally prescribed norms.
The other special resolutions were regarding remuneration payable to Aditya Khaitan for three years from 2017-2019. In 2017, Khaitan was the managing director of the company. Also, waiver of excess remuneration paid to Aditya Khaitan for the year ended March 31, 2017, was not passed by requisite majority. A section of shareholders at the AGM had asked for withdrawal of the resolution pertaining to the waiver.
The group has been trying to pare debt over the past year. While Eveready Industries and McLeod have been selling assets to raise money to repay its debts, the former is also in discussion with Duracell and other companies for a possible sale of battery business. The proceeds from such sale is likely to be used to pay back the lenders.
On the other hand, McNally Bharat, the troubled engineering entity of WMG, has signed an agreement with a consortium of investors led by Turbovent Industries for infusion of Rs 150 crore, subject to approval of a resolution plan outside the scope of NCLT.
The Kolkata bench of NCLT, however, has issued a temporary stay on the sale of McLeod’s assets after one of its financial creditors moved court to reclaim its dues. McLeod’s total debt is around Rs 1,700 crore while McNally’s debt is estimated at around Rs 1,500 crore. Eveready’s debt stands at around Rs 700 crore.