McLeod Russel sets ARC sustainable debt at Rs 1,200 crore

McLeod Russel India Limited has set Rs 1,200 crore of sustainable debt under arrangements with two asset reconstruction companies, against Rs 3,232.96 crore of borrowings assigned to them, as of September 30, 2026. McLeod Russel must meet payment, approval and compliance conditions or the restructuring can be revoked and original terms restored.

How much debt did McLeod Russel restructure?

McLeod Russel restructured borrowings assigned to National Asset Reconstruction Company Limited and J C Flower Asset Restructuring into sustainable and unsustainable portions. Of Rs 3,353.27 crore of total borrowings, including interest accrued to the applicable cut-off dates, Rs 2,483.30 crore was assigned to National Asset Reconstruction Company Limited and Rs 749.66 crore to J C Flower Asset Restructuring. A further Rs 120.31 crore remained payable to one lender bank as of September 30, 2026.

National Asset Reconstruction Company Limited sanctioned its resolution on April 2, 2026, and McLeod Russel executed the Master Restructuring Agreement, or MRA, on September 29, 2026. The Rs 1,050 crore sustainable component, after accounting for Rs 27.42 crore repaid by March 31, 2026, is payable over three years through promoter contributions, asset monetisation and operational accruals. McLeod Russel recognised the borrowing at fair value under Indian Accounting Standards, or Ind AS.

What are the terms of McLeod Russel’s J C Flower settlement?

McLeod Russel’s one-time settlement, or OTS, with J C Flower Asset Restructuring specifies Rs 150 crore of sustainable debt, payable over 15 months including through asset monetisation. The OTS was sanctioned in a May 13, 2026 letter and has a March 31, 2026 cut-off date. The stated amount reflects a Rs 62 lakh repayment made by that date and was recognised at fair value under Ind AS.

The two arrangements resulted in Rs 1,288.95 crore of unpaid interest being adjusted through exceptional items in the year ended March 31, 2026. This comprised Rs 846.48 crore relating to National Asset Reconstruction Company Limited and Rs 442.47 crore relating to J C Flower Asset Restructuring. McLeod Russel also retained an estimated Rs 119 crore from National Asset Reconstruction Company Limited’s unsustainable debt for conversion into equity capital and allotment to that creditor, subject to final determination and shareholder approval.

What conditions must McLeod Russel meet to keep the restructuring?

McLeod Russel must fulfil conditions precedent, or CPs, under the MRA and the J C Flower Asset Restructuring sanction letter, including asset sales, promoter funding, security creation, regulatory compliance and approvals. The MRA takes effect only after its CPs are met, while the OTS is separately subject to its own CPs. Management said as of September 30, 2026 that it expected fulfilment within the stipulated periods, without disclosing the deadlines.

McLeod Russel reported steps toward these conditions, including memoranda of understanding for tea-estate sales, additional promoter contributions and a Provident Fund settlement plan. It repaid Rs 47.05 crore of sustainable debt from operational accruals, including Rs 19.01 crore during the six months ended September 30, 2026. The company also proposed a pledge of promoter and related-party holdings as additional security, while noting that documentation and related actions were in progress.

How does the proposed tea-estate sale support McLeod Russel’s plan?

McLeod Russel’s board approved the proposed sale of specified assets at six tea estates, with a carrying value of Rs 118.59 crore on September 30, 2026 and indicated aggregate consideration of Rs 149.21 crore. The memoranda of understanding or term sheets remain subject to due diligence and statutory, lender and other approvals. The sale is therefore an identified funding mechanism rather than a completed source of repayment.

McLeod Russel had not recognised the indicated Rs 53.34 crore profit on the proposed sale because no binding agreement had been executed and the transaction had not closed by September 30, 2026. Operations at those estates continued to be included in the financial results, generating Rs 16.81 crore of profit from the effective date of sale through that date. The company’s three-year National Asset Reconstruction Company Limited repayment period is longer than the 15-month J C Flower Asset Restructuring timetable, making execution timing relevant to both arrangements.

What happens if McLeod Russel misses the debt conditions?

McLeod Russel says its debt restructuring will be revoked if it defaults on payments or fails to meet conditions, including regulatory compliance and approvals. Outstanding amounts would then be restored and become payable under their original terms. The Rs 1,050 crore and Rs 150 crore sustainable-debt figures are consequently conditional while the MRA and OTS requirements remain outstanding.

The Rs 120.31 crore payable to one lender bank is also unresolved, although McLeod Russel said its settlement proposal had been agreed in principle by September 30, 2026. The final amount, repayment period and payment modalities had not been determined. The company continued to provide simple interest at originally specified or otherwise advised rates, but did not recognise penal or compound interest because the payable amount remains subject to confirmation, reconciliation and settlement.

What other liabilities affect McLeod Russel’s debt outlook?

McLeod Russel reported statutory liabilities of Rs 265.30 crore on September 30, 2026, including a Rs 191.11 crore demand for Provident Fund arrears. The Assam Tea Employees Provident Fund Organisation approved repayment of dues through January 31, 2026 over three years in a March 12, 2026 letter. Interest and penalties have not been recognised because management intends to seek waivers or concessions and reconciliation with tea-estate records is pending.

Inter-corporate deposits, or ICDs, are a separate uncertainty from the ARC arrangements. McLeod Russel had Rs 2,761.09 crore of ICDs outstanding to promoter-group and certain other entities at September 30, 2026, against which Rs 2,346.75 crore had been provided. The company said the final recoverable amount cannot currently be determined and that legal and other recovery measures are under way.

Conclusion

McLeod Russel has reduced the debt designated as sustainable under its two ARC arrangements to Rs 1,200 crore from Rs 3,232.96 crore assigned to the two creditors. The terms rely on three linked mechanisms: repayment from operating accruals, promoter funding and asset monetisation. The restructuring also leaves Rs 120.31 crore with a lender bank to be finalised and reserves an estimated Rs 119 crore for a proposed equity conversion.

The next points to watch are completion of the proposed Rs 149.21 crore sale of six tea-estate assets, fulfilment of MRA and OTS conditions, and finalisation of the lender-bank settlement. McLeod Russel also needs shareholder approval and confirmation for the proposed equity conversion, while management’s ability to continue repayments from operational accruals will be tested over the three-year and 15-month repayment periods.