McLeod Russel debt deal: ₹1,050 crore by 2029

What the NARCL understanding changes

McLeod Russel India Ltd, promoted by the Brij Mohan Khaitan family, has reached an understanding with National Asset Reconstruction Co Ltd (NARCL) to restructure about three-fourths of its outstanding debt. The development follows a long effort to stabilise the finances of India’s largest bulk tea producer. The company said it has accepted NARCL’s sanction for restructuring, which gives it a defined repayment horizon. The sanction letter lays down the sustainable debt to be repaid and the equity component to be issued to NARCL. The deal also reduces the number of major creditors the company needs to negotiate with. For investors, the key takeaway is clarity on a large portion of lender claims, while also signalling dilution through the debt-to-equity conversion.

Key terms in the sanction letter

As per the sanction letter, McLeod has to pay ₹1,050 crore to NARCL on or before February 15, 2029. This sets a single end-date for the sustainable portion of the obligation, allowing the company to plan repayments over time. The package also includes conversion of the unsustainable portion of debt into equity. Under this conversion, NARCL will receive 10% fresh equity shares of McLeod on a fully diluted basis. The company has also indicated that the arrangement is subject to approvals and includes promoter shareholding pledge conditions. A more detailed agreement outlining the repayment schedule is expected to be signed in the following weeks.

How NARCL became the lead creditor

NARCL took over McLeod’s outstanding debt of eight scheduled commercial banks worth ₹1,033.03 crore in March 2025, according to the company’s disclosures. This transfer consolidated multiple bank exposures into one public sector-backed asset reconstruction company. Separate reporting also said a consortium exposure of ₹1,104.69 crore was transferred to NARCL for ₹700 crore, implying a 36% haircut for original lenders. That transaction was described as being structured under a 15:85 cash-to-security receipts framework, with 15% paid upfront and 85% through security receipts over five years. McLeod has consistently maintained that for the borrower, the outstanding loan remains the same irrespective of the price paid by the ARC to acquire it.

Lender composition after consolidation

After the bank loans moved to NARCL, McLeod’s creditor base narrowed to three entities: NARCL, JC Flower ARC, and IndusInd Bank. The debt being restructured with NARCL represents 75.02% in value of the total lenders as on December 31, 2025. McLeod said in a regulatory filing that it is in discussions with remaining lenders representing 24.98% for restructuring or settlement. The company has also stated that JC Flower ARC and IndusInd Bank together have around ₹350 crore exposure to McLeod, based on its calculations. Another disclosure around the debt transfer phase described IndusInd Bank’s exposure as ₹71.66 crore in the form of an unsecured loan, and noted it did not join the bank assignment to NARCL.

Repayment options under discussion

Industry sources indicated McLeod may consider three broad funding avenues to meet creditor payouts: promoter infusion of fresh equity, sale of tea gardens, and cash flows from operations. The company’s operational footprint provides potential levers for monetisation, but any asset sale would depend on buyer interest and valuation. Cash flow from operations depends on tea prices, crop performance, and cost control, all of which have been volatile in recent years. The equity conversion to NARCL and possible promoter infusion also highlight the role capital structure changes could play in the overall resolution. For now, the only quantified commitment in the sanction is the ₹1,050 crore payment deadline to NARCL.

Operations snapshot: gardens and production

McLeod’s plantation base remains significant even as it works through financial stress. The company has 34 gardens in India, with two in Bengal and 32 in Assam. These Indian operations produce about 38 million kilograms of tea. In addition, it has five gardens in Uganda producing 17 million kilograms more. The scale matters because lenders and investors typically assess debt sustainability against the ability of core operations to generate stable cash flows.

Why earlier restructuring proposals failed

McLeod Russel had presented four restructuring proposals to lenders since 2018-2019 without success, largely due to lack of unanimity among creditors. One earlier effort included a one-time settlement backed by Carbon Resources, which offered to buy roughly half of McLeod’s gardens for upfront cash, but it did not culminate in a final agreement. In another phase, the company said it was seeking a composite resolution of total debt and engaged with ARCs and banks for a sustainable repayment amount and timeline. The extended timeline underscores how complex multi-creditor negotiations can be, especially when security structures and risk assessments differ across lenders.

Market context: valuation and losses

As of April 2026, McLeod Russel’s market capitalisation hovered around ₹454 crore. The company’s price-to-earnings ratio was deeply negative, fluctuating between -2.02 and -2.15, indicating continuing net losses. These metrics frame why the restructuring includes an equity conversion component and why repayment is spread over several years. They also illustrate the gap between the company’s market value and the scale of obligations being negotiated with lenders.

Key facts at a glance

What to watch next

The next step is the signing of a detailed agreement between NARCL and McLeod that will specify the repayment schedule leading up to February 2029. In parallel, investors will track negotiations with the remaining lenders representing 24.98% by value. Approvals tied to the equity conversion and promoter share pledge conditions will also be relevant because they affect timing and the final structure of the deal. The company’s ability to generate cash from operations, and any decisions around asset monetisation or promoter infusion, will shape how the repayment plan is executed. For now, the sanction letter provides the clearest framework McLeod has had in years for the largest slice of its lender claims.