McLeod Russel India Ltd has reported a quarterly loss of Rs 1078.27 crore in the fourth quarter of the last fiscal led by an exceptional item of Rs 933.42 crore in the profit & loss account relating to provisions made by the company to loans extended to group firms over the years. It had reported a loss of Rs 192.93 crore in Q4FY22.
India’s largest bulk tea producer by output had extended the loans in the form of inter corporate deposits. As on March 31, 2023, the amount outstanding on those ICDs stood at Rs 2761.74 crore (including interests).
These borrowing companies then in turn had advanced the loan taken to other entities, including one of the promoter group company which is under corporate insolvency resolution process (CIRP) under Insolvency & Bankruptcy Code, 2016.
In the notes to the results, McLeod stated that the claims made by these borrowing companies pursuant to CIRP have not been fully acknowledged and the amount admitted by the resolution professional is lower than those being claimed by these companies.
“Whilst CIRP proceeding is yet to be concluded and amount finally recoverable pursuant to the same is yet to be determined, considering the amount so far accepted by the RP in respect of the claims made by the companies, valuation indications, eventuality of recovery in this respect and resultant net worth of these companies, provision of Rs 1010.38 crore {including Rs. 90.97 crore provided in earlier years} on lumpsum basis without prejudice to company’s legal right to recover the amounts given by it, has been made in these financial results,” the note added.
While McLeod Russel did not name the entity, the Williamson Magor group company undergoing CIRP is McNally Bharat Engineering Co Ltd.
Moreover, a Rs 14 crore outstanding from a party against advance given in earlier years has also been fully provided after recognising remote chances of recovery.
The management said the outstanding dues, net of provision, shall be recovered/adjusted and/or restructured depending upon the outcome of the recovery proceedings following CIRP or otherwise and completion of the resolution process of the company. No further provision will be required at this stage, it added.
Operationally, the company’s performance worsened during the quarter with revenue falling to Rs 226.04 crore in Q4FY23 on a consolidated basis from Rs 254.24 crore in the same period of previous year. For the full year, revenue from operations stood at 1,369.57 crore compared to Rs 1,355.83 crore in FY22. Net loss widened to Rs 1,056.5 crore from Rs 180.92 crore in FY22 due to the provision.
Debt resolution
McLeod informed that the debt resolution process will recommence after it managed to come out of CIRP by reaching an out of court settlement with IL&FS Infrastructure Debt Fund, the creditor. The resolution plan proposed by McLeod’s lenders had included a one time settlement (OTS) of the outstanding dues. The company then roped in Carbon Resources Pvt Ltd to work out the plan. As McLeod slipped into CIRP, those plans were in abeyance.
