McLeod Russel debt recast: ₹1,050cr to NARCL by 2029

The agreement that caps a seven-year clean-up

McLeod Russel India Ltd, India’s largest bulk tea producer promoted by the Brij Mohan Khaitan family, has reached an understanding with National Asset Reconstruction Co Ltd (NARCL) to restructure around three-fourths of its outstanding debt. The development follows years of efforts to streamline a stretched balance sheet and simplify its lender base. The company said it has accepted a restructuring sanction letter from NARCL, setting out repayment and equity-conversion terms. For investors and creditors, the key change is the move from open-ended negotiations to a defined repayment horizon with the largest creditor by value. The plan also formalises an equity component, which can alter the ownership structure on a fully diluted basis. McLeod said further documentation will follow, with a detailed agreement expected to be signed in the coming weeks. The schedule, once executed, is expected to specify the repayment milestones leading up to the 2029 deadline.

What the NARCL sanction letter requires

Under the sanction terms described, McLeod has to pay ₹1,050 crore to NARCL on or before February 15, 2029. The amount is described as the sustainable portion of the debt under the restructuring package. The timeline gives the company a multi-year window to plan its repayment programme rather than rely on a near-term one-time settlement. The sanction also indicates NARCL’s central role in the resolution process because it represents the majority of lender value. McLeod has disclosed that the debt being restructured with NARCL represents 75.02% in value of total lenders as on December 31, 2025. The company has positioned the agreement as a key step toward a composite solution for its borrowings.

Equity conversion: NARCL to receive 10% fresh shares

Alongside the repayment obligation, the package includes an equity element. NARCL will receive 10% fresh equity shares of the company through conversion of unsustainable debt on a fully diluted basis. This implies dilution for existing shareholders, since the equity is described as newly issued shares. The conversion is linked to the portion of debt identified as unsustainable within the restructuring framework. In the disclosures reproduced, the equity issuance is noted as being subject to approvals and accompanied by promoter shareholding pledges. While the sanction sets out the broad terms, the operational details are expected to be captured in the final agreement to be signed between McLeod and NARCL.

How NARCL became the largest creditor

NARCL’s position stems from the transfer of loans by multiple banks. The public sector banks-backed ARC took over outstanding debt of eight scheduled commercial banks worth ₹1,033.03 crore in March 2025, McLeod has said, reducing the number of its debtors to three. Separately, reports cited sources saying a consortium transferred debt exposure to NARCL for ₹700 crore, representing a 36% haircut, in a transaction that referenced total debt of ₹1,104.69 crore and a 15:85 cash-to-security receipts structure. The different figures reflect how the transaction has been described across disclosures and source-based reports. What is consistent across the versions is that the transfer consolidated lender exposure into an ARC-led structure and narrowed the counterparty set for negotiations. McLeod officials and industry reporting have framed this consolidation as a practical step to make a restructuring workable.

Remaining lenders: talks continue for 24.98%

McLeod has said discussions are continuing with the remaining lenders representing 24.98% for restructuring or settlement. Apart from NARCL, the two other outstanding debtors named are JC Flower ARC and IndusInd Bank. According to the company’s calculations cited in the text, these two have around ₹350 crore exposure to the tea producer. When banks assigned their loans to NARCL in 2025, IndusInd did not join them, leaving it outside the pool transferred to NARCL. The company’s next steps, therefore, include aligning the terms for the smaller lender segment so that the overall resolution is not fragmented. Any final outcome on the residual exposure will matter because it shapes cash outflows and security conditions alongside the NARCL package.

Funding options the company is evaluating

Industry sources have suggested McLeod could consider three broad options to raise funds to pay off its debtors. The first is promoters bringing fresh equity into the company. The second is the sale of tea gardens. The third is using cash flow from operations. The sanction terms do not, in themselves, specify which route will be used, but the repayment deadline makes the funding plan central to execution. The possibility of asset sales is notable given the scale and spread of McLeod’s plantations. Promoter funding is also relevant because the restructuring package includes an equity issuance to NARCL and references promoter share pledges, subject to approvals.

Operational footprint: gardens in India and Uganda

McLeod’s operating base provides context for how repayment capacity could be built through operations. The company has 34 tea gardens in India, with two in Bengal and 32 in Assam. These gardens produce about 38 million kilograms of tea. In addition, it has five gardens in Uganda producing another 17 million kilograms. This production footprint underpins the “cash flow from operations” option mentioned by industry sources. It also frames why the company could evaluate selective estate sales as part of a funding mix, given the number of gardens and geographic spread. The restructuring is focused on debt, but the operating footprint remains the asset base around which any recovery plan would be shaped.

Why this matters for lenders and shareholders

For lenders, the NARCL sanction provides a structured target amount and date for the sustainable debt, alongside a mechanism to deal with unsustainable debt via equity conversion. For shareholders, the 10% fresh equity issuance on a fully diluted basis is a direct governance and valuation consideration, because it changes the shareholding structure. The consolidation of creditors from multiple banks to a smaller set of counterparties can also reduce coordination friction in negotiations, based on how the company and reports have characterised the earlier period. The filings referenced also note that McLeod made disclosures under Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, to stock exchanges including BSE, NSE and The Calcutta Stock Exchange. That positions the development as material for the market and ensures the terms are formally on record.

Key numbers at a glance

What to watch next

The next operational milestone is the signing of a detailed agreement between McLeod and NARCL, which the company expects in the following weeks, and which should outline the repayment schedule. In parallel, investors will watch whether McLeod reaches restructuring or settlement terms with the remaining lenders representing 24.98% by value. The equity conversion and any promoter pledge conditions, noted as subject to approvals, are also key implementation items. With the repayment deadline set for February 2029, the company’s choice among promoter funding, asset sales, and operating cash flows will determine how the schedule is executed. For now, the sanction acceptance brings a defined structure to a debt resolution effort that has been under way for years.