Kolkata (West Bengal), June 6 : Mcleod Russel India Ltd said it has signed an initial pact with MK Shah Exports Ltd to sell some tea estates in the northeastern state of Assam for about Rs 331 crore ($49 million).
The deal will help rationalise the company’s production business, Mcleod Russel said in a stock-exchange filing. The transaction is subject to certain approvals and completion of due diligence by Kolkata-based MK Shah Exports , it added.
The tea estates proposed to be sold are Beesakopie Tea Estate, Raidang Tea Estate, Daimukhia Tea Estate, Samdang Tea Estate, Baghjan Tea Estate, Bordubi Tea Estate, Koomsong Tea Estate and Phillobari Tea Estate. These estates posted sales of Rs 192.76 crore for the financial year through March and contributed about 12.33% to the company’s total revenue.
Mcleod Russel plans to use the proceeds to repay certain high-interest debts, buy back its shares worth Rs100 crore and invest for diversification into the packet tea business, the company Russel had said on May 30, when its board had approved the proposed sale.
Mcleod Russel has already entered into an agreement with Eveready Industries India Ltd for diversification into the packet tea business through a third entity.
The company’s operations are divided under three divisions — production in its own tea estates, production using tea leaves purchased from small growers, and teas produced by step-down overseas subsidiaries. It produces about 67 million kgs of tea at its own tea estates, which the company said is “disproportionately heavier compared to the other two segments”.
For the calendar year 2017, Mcleod Russel’s production from the India business rose to 1,322 million kg from 1,268 million kg in 2016. It also benefitted from higher exports due to a decrease in Kenyan production and improvement in geopolitical atmosphere amongst consuming countries such as Russia, Egypt, Pakistan and countries in West Asia.
The company expects tea prices in India to improve substantially in 2018 due to demand in global markets and improved economic activities, particularly in the rural markets.(VC Circle)