Borelli Tea Holdings, a wholly owned subsidiary of McLeod Russel India, has decided to sell its entire shareholding in Gisovu Tea Company, Rwanda, and 50 per cent of its equity shares in Pfunda Tea Company, also in Rwanda.

Separate memoranda of understanding (MoUs) have been executed with Rwanda Tea Investments for the Rs 140-crore deal (approximate).

Rwanda Tea Investments is 75 per cent held by Luxmi Tea, owners of the iconic Makaibari brand, and 25 per cent by The Wood Foundation Africa.

Luxmi Tea director Rudra Chatterjee said, “Luxmi’s focus is on high quality estates and Gisovu is probably one of the best estates in Africa.” The combined production volume of Gisovu and Pfunda would be around 4.7 million kg.

This is the first tranche of gardens that McLeod would be selling outside India. The company has a presence in Africa and Vietnam. Although McLeod has a larger presence in Uganda (with production of around 18 million kg), industry sources said that Rwanda had the best gardens in Africa.

McLeod has been selling gardens to trim debt. As on September, McLeod’s debt stood around Rs 1,500 crore, said a company’s senior official.

In the current fiscal year, McLeod has so far sold 12 gardens for Rs 472 crore, having a crop volume of 14.9 million kg. In September, it had again entered into an MoU with proposed buyers to sell another eight gardens for Rs 323.61 crore.

The balance from the sale is expected to be realised shortly, said officials. By March, the target is to reduce the debt to Rs 700-800 crore. Increase in wages and lower export demand are some of the reasons that have been a drag on the performance of the company.

The Williamson Magor group, of which McLeod is a part, has been on a drive to reduce debt across companies. In Eveready, bids were being invited to sell stake in the battery business.

For McNally Bharat Engineering, a resolution plan under Project Sashakt has been placed before lenders for consideration. McNally’s debt at the end of September 2018 was around Rs 1,500 crore. However, the McNally resolution plan would have to get positive rating from two credit rating agencies.

Deal Street

• McLeod to dispose of entire shareholding in Gisovu Tea Company
• To sell 50% of its equity shares held in Pfunda Tea
• Separate MoUs have been executed with Rwanda Tea Investments for the deal valued at close to Rs 140 crore
• McLeod’s total debt as of September was Rs 1,500 cr; target is to bring it down to Rs 700-800 crore by March this year