The promoters of McLeod Russel hope to finalise the restructuring of debt with an offer of a one-time settlement (OTS) with banks and financial institutions in a ‘month or two’.

The Khaitan family, promoters of bulk tea producer McLeod, has been in discussion with banks for quite some time but a resolution remains elusive so far.

“The discussions are taking much longer than I hoped to get all banks on board,” Aditya Khaitan, chairman of McLeod, told shareholders at the company’s annual general meeting on Friday.

McLeod has offered Rs 1,030 crore to banks as OTS to settle an outstanding debt which is over Rs 1,600 crore.

To raise money for OTS, the company has entered into an exclusive pact with Carbon Resources to sell 15 Assam gardens that are capable of producing about 18 million kg of tea for about Rs 700 crore.

A company source ruled out the possibility of raising the offer further given the deteriorating financial condition of the tea industry this year.

In his response to shareholders, Khaitan called attention to the plight of the tea industry which he described was suffering from a ‘double whammy’ of increased cost led by a wage hike in Assam and Bengal and weak tea prices due to global turbulence.

“The tea industry is going through a very difficult period right now. There is a mismatch between demand and supply in the market,” Khaitan said.

Sri Lanka, an exporter of orthodox tea, had a difficult time in 2022. Taking advantage, producers in India had moved their focus from CTC to orthodox teas. However, the principal buyer of orthodox teas, Iran, was not buying this year, Khaitan said, adding that weak demand led to weaker prices.

However, Africa, which produces CTC teas, has been churning a lot of crops this year. But buyers of their CTC teas are also going through financial problems. The value African tea is getting is much lower, Khaitan said. Whenever that happens, Assam teas take a hit. That’s why the export market was lower, he argued.

But he hoped that the second half should see some improvement in prices. “Also we heard that the Iran market is opening up. So people would be able to make more orthodox teas in the next 2-3 months. Hopefully, supply will taper off and demand will go up. We in the tea industry need prices to move up,” Khaitan summed up.