McLeod locks deal with Goodricke to sell two more tea estates in Assam

The two tea estates are likely to fetch Rs 912.9 million
Marking its third tranche of sales, McLeod Russel, which is on a drive to trim its tea estates portfolio in the country, has concluded an agreement to sell two estates in Assam to the Camellia Plc-owned Goodricke Group and one of its subsidiary companies, Amgoorie India.

Sources said the valuation of these two tea estates - poised to be sold to Goodricke and its subsidiary at Rs 360 a kilo for the Harchurah tea estate and Rs 350 a kilo for the Bargang tea estate - is likely to fetch McLeod Russel a total of Rs 912.9 million from this sale’s proceedings. The Harchurah tea estate will be acquired by Goodricke under its own portfolio, while the Bargang estate will be acquired via Amgoorie upon successful completion of the due diligence process.

Taken together, these gardens contribute around Rs 590 million, or 3.73 per cent, of the seller’s annual turnover.

The valuation of the previous gardens sold to Luxmi Tea recently stood at Rs 350 a kilo, compared to the ones sold to the M K Shah Exports at Rs 340 a kilo.

Sources said McLeod Russel is in talks with Dhunseri Tea & Industries and James Warren Tea, apart from some non-tea corporate engineering entities, to sell more gardens in the Assam-Dooars belt. It may mark an incoming fourth tranche of garden sales.

On a divestment mode to pare debt, fund a share buyback, and raise capital to fund its recent decision to foray into packet tea segment, McLeod Russel has now upped its target to Rs 8 billion as the sale proceedings from its tea estates. Previously, the company had targeted to raise Rs 5 billion.

However, in its annual general meeting this year, the company’s shareholders approved the sale of additional tea estates, which exceeds the initial target.

According to Kamal Baheti, director at McLeod Russel, shareholders’ nod is needed for the company to execute sales, which exceed 20 per cent of the value of fixed assets. Under the proposal, the company will be suggesting to offload a maximum of 35 per cent of its fixed assets, which translates into Rs 7 billion. Its standalone fixed assets account for around Rs 20 billion, while the total assets account for over Rs 33 billion. It excludes tea gardens from Vietnam and Africa.

Under its plan to sell tea gardens, this Willamson Magor Group (WMG) has so far concluded agreements to sell 14 estates in Assam exceeding Rs 5.6 billion in the current fiscal year.

In the recent past, so far, this WMG enterprise has sold four estates in the Moran region in Assam to Luxmi Tea for Rs 1.41 billion; another eight estates in the Doom Dooma region in Assam were offloaded to M K Shah Exports for Rs 3.31 billion.

The latter was desperately looking at an Assam expansion which had brought it to a spat during the resolution process of Assam Company (India). However, this acquisition eased tension, with Assam Company and M K Shah now focused on their recently acquired gardens.

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