Magor Group Plans $35m Ecb For Arms

The Rs 125 crore thus raised will be used to meet capital expenditure and working capital requirements of these group companies as well as for repaying high cost debt, a senior official in the B M Khaitan-controlled group said.

"With the capital market in a tailspin, the only option left was raising funds through ECBs," he added.

The amount will be drawn through separate offerings for each of the three companies. The loans will have a maturity of five years. The concerned companies have already received letters of intent from banks for the syndication of these loans and are currently awaiting ministry of finance clearance.

 

Since the relaxation of ECB guidelines in June this year, the overseas loan syndication market has found itself flush with Indian paper.

The norm that 100 per cent export-oriented units and EPCG licence-holders can now raise $15 million or the average amount of annual exports during the previous three years, whichever is lower, for meeting project-related rupee expenditure, will be to the advantage of the Williamson Magor group.

Export figures prominently in the activities of all the three tea companies. While Bishnauth Tea's total export in 1995-96 was Rs 42.76 crore f.o.b (40 per cent of turnover), that of McLeod was Rs 42.66 crore (30 per cent of tea turnover). Export figures for George Williamson were not available. Once regarded as cash cows of the group, the financial standing of the Williamson Magor tea companies has relatively weakened in recent times. While McLeod's interest payment in 1995-96 rose to Rs 9.34 crore from Rs 2.47 crore in the previous year, that of Bishnauth Tea was Rs 14.71 crore last year, up from Rs 11.3 crore in 1994-95.

Bishnauth Tea has, in September, raised funds through the public deposit scheme -- something uncommon in the tea industry. The Magor source, however, said, it was the preferred route as the interest payment works out cheaper than bank loans.

The group had divested its stake in McLeod Russel and Eveready to raise around Rs 80 crore earlier in the current fiscal. It had also offloaded around 5 per cent of its stake in Nestle India, mopping up another Rs 40 crore.

Around Rs 120 crore raised in the process was utilised to repay outstanding debts of group companies. While all the three tea companies are mainly into production of bulk tea, McLeod has recently started producing packet tea under the brand name 'Tez'.

The group had recently assigned McKinsey & Co and J P Morgan for business and financial restructuring of group activities. As per the recommendation, the other tea companies of the group are likely to move into packet tea which would give higher return on investment.