Deloitte reveals trouble in the finances of tea producer McLeod Russel
Global professional services firm Deloitte has indicated that its client McLeod Russel is unlikely to remain operational if its efforts for loan restructuring do not come to fruition. This scenario is primarily a result of a large pool of liabilities that the tea company is struggling with, which are well in excess of their assets.
McLeod Russel is among the largest tea producers across the globe. The firm was established in 1869, and has its Indian base in Kolkata. Over the years, the firm’s operations have expanded to the UK, UAE, a number of African countries as well as Vietnam. The firm is part of the Williamson Magor Group.
Currently, the company has nearly 50 tea estates in Assam, and another five in west Bengal. The firm’s factories and estates extend throughout its international network as well. While the firm operates on remarkable scale, a new evaluation from Deloitte has revealed that the firm appears to be struggling financially.
As of the end of March this year, liabilities at the firm exceed its assets by nearly Rs. 15,00 crores. The firm is currently unable to repay its loan or negotiate any of its other liabilities, which paints a dire picture for its operations in the near future, according to Deloitte.
The firm is currently in conversation with lenders to help manage and restructure its loan obligations. As per Deloitte’s analysis, the firm is currently suffering from “a material uncertainty which cast a significant doubt on the company's ability to continue as a going concern.”
Moreover, the tea producing giant has meager control of the fate of its operations going forth. “The ability of the company to continue as a going concern is solely dependent on the acceptance of the refinancing proposal, which is not wholly within the control of the company,” said Deloitte.
The financial strife is further accentuated by the fact that there are inter-company deposits (ICDs) in excess of Rs. 1,700 crore, whereas the interest obtained on these deposits amounts to less than Rs.80 crore. Given the overall financial conditions, Deloitte proclaims meager hope that these ICDs will be recovered.
Deloitte also found issues surrounding financial entries in the firm’s books. “In our opinion and according to the information obtained by us, the sundry income may have been funded to the said promoter group company through monies indirectly lent by the company and therefore may not have been actually realised. These therefore may have been reflected only by book entries and prejudicial to the interest of the company.”
McLeod Russel's financial situation is an example of the growing pool of non-performing assets that are plaguing the Indian economy at present. Most major consulting firms are engaged in helping creditors and borrowers alike with rectifying this situation.
