McLeod Russel, the country’s largest producers of bulk tea, plans to dispose certain tea estates to rationalise operations. The company has set up a committee to identify the tea estates and carry out the process of disposal.

The board on Wednesday gave an in-principle approval to the proposal. It also approved buyback of shares to the tune of ₹100 crore or below 10 per cent of the company’s share capital and free reserves, the company said in a regulatory filing to the stock exchanges today.

The company proposes to utilise the sale proceeds (from sale of tea estates) towards repayment of certain high interest bearing debts. According to KK Baheti, Wholetime Director, the company has a consolidated debt of around ₹1,000 crore and it would want to bring it down by ₹500-600 crore by the end of this fiscal.

“While a part of the funds will come through internal generation, a portion will come from the sale of tea estates,” Baheti told BusinessLine . The sale of estates is likely to complete by the end of this fiscal, he added.

This apart, a portion of the funds from sale of estates will be utilised to buy back shares and also invest for diversification into packet tea business.

McLeod plans to enter into a joint venture agreement with Willamson Magor Group entity Eveready Industries India to develop the packet tea business through a separate entity.

Financial performance

For the quarter ended March 31, 2018, McLeod Russel saw its losses widen to ₹142 crore compared to a net loss of ₹108 crore in the same period last year. However, tea being a seasonal industry, is subject to volatility in production and prices.

Total income increased by nearly 10 per cent to ₹530 crore (₹482 crore) during the quarter under review.

The company’s tea prices were higher by ₹10 a kg at ₹173 a kg as compared to last year. The total sales volume was 901 lakh kg (852 lakh kg); exports during the year was 19.5 mkg at ₹213 a kg against 15.5 mkg at ₹210 a kg last year.

For the year ended March 31, 2018, the company’s net profit on a consolidated basis increased by 242 per cent to ₹219 crore (₹64 crore).

Consolidated EBIDTA is higher at ₹161 crore (₹110 crore).