McLeod Russel receives bids for its tea estates from Luxmi Tea and M.K. Shah exports

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Luxmi Tea Co. Pvt. Ltd. and M.K. Shah Exports Ltd have made binding bids for a part of McLeod Russel’s tea plantations which are more or less in line with the latters expectations. McLeod Russel, the world’s largest tea producer had invited expression of interest for some of its estates in Assam and West Bengal last week.

Why is this important?

McLeod Russel’s net debt stands at Rs. 1000 crore as on 31st March 2018. The company had been looking to lower gearing through for sale of its tea estates. The company expects to realise Rs. 400-500 crores through sale of estates and aims to bring down the debt to Rs. 500-600 crores by the end of FY 2019. The company had announced that the proceeds from sale will be used for launching a packaged tea joint venture with Eveready Industries India Ltd.

How the stock will be impacted?

The stock will be impacted positively if the company is able to sell the tea estates as the company will be able to reduce its debt and improve operational efficiency. Further, the company will benefit from its joint venture with Eveready Industries India Ltd.

McLeod Russel (CMP Rs. 141, M Cap Rs. 1,544 crores, P/B 0.84x FY18)

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