McLeod to sell 4 Assam estates to Makaibari owner

GUWAHATI, June 7, 2018 (TNN): The Luxmi Group, which owns the iconic Makaibari tea estate in Darjeeling, has signed an MoU on Wednesday with McLeod Russel, world's number one private bulk tea producer, to acquire its four tea estates in upper Assam with a production capacity of four million kg (mkg) at Rs 141 crore.

The development comes a day after McLeod, in what could be one of the big-ticket tea industry deals in recent years, inked another MoU with Mumbai-based M K Shah Exports (MKSEL) to sell off eight of their 48 tea estates in Assam for Rs 331 crore.

Following these two back-to-back successful deals, the Williamson Magor groupfirm, which is so far done with its selloff spree in Assam, will aim at disposing of some of its four gardens in Dooars.

With this acquisition (post regulatory clearances and due diligence), there will be 20 gardens in the Luxmi group's India kitty. Luxmi will now have a production capacity of 20 million kg in India. "We hope that these new estates in Assam will also find favour with those who appreciate great tea. We look forward to build and enhance the credentials Moran has established over its long and storied history," Rudra Chatterjee, MD of Luxmi Group, told the media.

These four estates — Moran, Sepon, Attabarrie and Lepetkatta — of erstwhile Moran Tea Company in Moran area of Dibrugarh district, had started operations in 1864. The company had since then maintained the high standards, under the supervision of exceptional planters, added Chatterjee. Apart from this, the group is developing a greenfield tea estate spanning 4,500 hectares in Rwanda, Africa. Luxmi Tea, led by its chairman Dipankar Chatterjee, was founded in 1912.

The four Moran gardens contributed Rs 88 crore or 5.6% of the total turnover of McLeod Russel, the company said in a regulatory filing on Wednesday. McLeod's total turnover in the last fiscal was at Rs 1,919.2 crore and its domestic production was 67 mkg. The latest selloff of four gardens has earned McLeod Rs 350 per kg of tea leaf.

The sale of 12 Assam gardens in two days will reduce McLeod's debt by Rs 472 crore, almost meeting its debt cut target of Rs 500 crore by the end of this fiscal. The Khaitans-led firm, which produces 118 million kg tea from its 65 gardens across India, Vietnam and Africa, currently has debts of about Rs 1,000 crore.

On Wednesday, McLeod chief financial officer Kamal Baheti told media: "We have almost met with our portfolio balance target. It will also cut our disproportionately heavier domestic output in the portfolio. In future, in order to cut further debt, we may look to sell four gardens in Dooars. The rest of the debt will be managed by the profit we shall make."

On Wednesday, McLeod Russel scrip closed with a 2.8% gain at Rs 137.20 on BSE.

The tea major had also said that it would utilize the sale proceeds in repayment of certain high interest-bearing debts and buying back shares. With the rest of money, McLeod Russel is also supposed to make investment for diversification into packet tea business for which it has already agreed to join hands with Eveready Industries India via a third entity.

Featured image:Thunderbolt Tea