Besides Takru, two independent directors resigned on account of old age and its former chief financial officer (CFO), Kamal Kishore Baheti moved over to another WMG entity after tendering his resignation at McLeod.
Calls to Baheti, over his new assignment, went unanswered. He was also a director at this company.
Pradip Bhar, a cost accountant by profession, who was associated with WMG for over 31 years, has taken charge as the firm’s new CFO.
Raj Vardhan, experienced in the agri sector, has joined the McLeod board as an independent director. He has over six years of experience at a US based non-profit organisation at its executive board; as well as four years of experience in the board of Souzmoloko, a dairy farming and manufacturing association in Russia. He was also involved with Olam International, a Singapore-based multinational company.
“Raising of capital is the utmost priority for McLeod and there is possibility of growth in the value-added tea segment. Also, there is scope to scale up the company’s operations”, Vardhan told Business Standard.
“Before a meeting of the board takes place, it is not possible for me to state how McLeod’s financial position can be improved, but definitely, there is potential in the company to come out from any crisis and improve its financial position”, he said in reply to a query on how the board plans to combat the present crisis.
Suman Bhowmik, a consultant by profession and a specialist in communications and development, has been roped in as another independent director. He has been a CSR consultant to the likes of JSW Bengal Steel, Ambuja Cements and Apeejay Group and has worked with industry bodies like Cll and FICCI, besides other assignments.
According to Deloitte, McLeod’s current liabilities exceeded current assets by Rs 1,436 crore as on end-March 2019. In 2018-19, it adds, the company was unable to discharge its obligations on repayment of loans and settlement of other financial and non-financial liabilities, including statutory ones.
While giving an adverse opinion primarily on the issue of recovering inter-company deposits (ICDs), the auditor stated the tea producer is currently in discussion with the lenders on a refinancing proposal.
Indications exist, it said, of “a material uncertainty which cast a significant doubt on the company's ability to continue as a going concern”. It also added, “The ability to continue as a going concern is solely dependent on acceptance of the refinancing proposal, which is not wholly within the control of the company”.
Explaining the basis of its adverse opinion, the auditor said as of end-March, ICDs of Rs 1,745 crore were given to promoter group entities and other companies; Rs 77 crore had accrued as interest.
Recovery of these ICDs and the interest income is doubtful, considering the financial condition of WMG and the other companies
to which these were given.
Moreover, McLeod made no formal provision for the outstanding amounts recorded as ICDs and accrued interest. “Consequently, the non-current portion of loans and interest accrued thereon are overstated and loss for the year is understated by Rs 1,821.7 crore,” Deloitte said.
For the year ended March 31, 2019, McLeod reported a nearly 20 per cent decline in total income at Rs 1,960 crore and an 82 per cent fall in net profit to Rs 38.8 crore. It has been selling its estates to pare debt and is estimated to have received Rs 940 crore from the sale proceeds.
On June 29, Price Waterhouse & Co quit as the auditor of another WMG company, Eveready Industries. It had cited its inability to get sufficient audit evidence on Eveready Industries’ ICDs and its recovery.
Also, on May 31, Deloitte Haskins & Sells and V Singhi & Associates, auditors of McNally Bharat Engineering, another WMG entity, raised concern over this firm’s ability to remain in business unless a financial restructuring proposal with lenders was approved.