YES Bank Ltd has picked up a 9.47 per cent stake in Eveready Industries by way of invocation of shares pledged by group company, McLeod Russel India Ltd. This follows McLeod Russel defaulting on repayment of credit facilities extended by the bank.
Both Eveready and McLeod are part of the BM Khaitan Group.
McLeod Russel, amongst the largest tea planters in the world, had recently told the bourses that it was in talks with bankers for restructuring and refinancing its loans. As on date, the company’s debt is likely to be ₹1,800 – 2,000 crore, sources say.
In a stock market notification, Yes Bank pointed out that “pursuant to invocation of pledge of shares” it had acquired 68,80,149 equity shares of Eveready Industries Ltd, having nominal value of ₹5 per share. This invocation is tantamount to acquisition of 9.47 per cent stake in Eveready.
Apart from the Khaitans – who hold 42.93 per cent in Eveready as on March 31, 2019 – McLeod Russel held 2.29 per cent.
Eveready Industries is the country’s largest dry cell battery maker and has a turnover of about ₹1,542 crore in FY19. It reported a net profit of ₹47 crore. “Shares (have been) acquired on invocation of pledge subsequent to default / breach of terms of credit facilities sanctioned by Yes Bank to McLeod Russel India, which is a group company of the BM Khaitan Group,” a notification by the bank read. Yes Bank has maintained that “this is a one-time transaction”.
Both Eveready and McLeod have been trying to reduce debt at a company level.
McLeod incidentally has been facing liquidity issues and has been selling its tea estates to repay its financial obligations. The company has sold 16 tea estates and has entered into MoU for selling four more estates. It is also open to looking at further sale of assets of certain tea estates. Rating agency ICRA, while downgrading its long term rating to D, had said delays in utilising sale proceeds in debt reduction had resulted in significantly high financial leverage, and the sizeable debt repayment obligations were unlikely to be met from its operational cash flows.
Eveready, on the other hand, has had legacy debt issues. It had been monetising land assets to reduce debt. The company too has been facing ratings downgrade for continued high leverage and weakened liquidity. The BM Khaitan Group has also been in talks for dilution of promoters’ stake in its flagship, Eveready Industries.
Kotak Mahindra Bank has been mandated to scout for potential financial or strategic investors.