Slower-than-expected asset liquidation at the holding company and a tight liquidity situation in the seasonal tea business weighed on Mcleod Russel, said CFO Kamal Baheti.

ICRA has downgraded ratings of various bank and non-bank facilities due to the company's deteriorating liquidity profile. The stock has lost 10 percent this week and is down 65 percent this year.

Baheti said there have been some problems in one of the group companies. “Not directly but through our other group companies, we did give some support on the basis that there is going to be some liquidation of assets etc. at the holding company (Holdco) whereby the money can come which unfortunately has taken time because of the market situation, maybe uncertainty because of elections and we hope that that will happen soon,” he added.

The company has started the year on a good note but could not hold the momentum. "Currently the situation is far improved as far as the prices, shortage in Kenya etc. is concerned, but being a seasonal business we have trouble as far as limited period mainly from March-April-May-June where the liquidity situation is very tight and which is causing the problem,” he added.

Talking about the intergroup loan, Baheti said, “The total exposure as on March 31st from McLeod Russel to the group companies was to the tune of Rs 1,000 crore.”

“We have given it to the holdco and other group companies which in-turn has given to McNally Bharat which is currently going through resolution plan with the bankers etc. and we hope that they will come out with the resolution plan,” he further added.

Our exposure, as Baheti said, to the group companies which in any case hold investments in properties and other things which they wanted to dilute due to the loan that they have taken and also return the money which has been taken by the group.

“I will not be able to give entire details but whatever I know from the holdco side is that in next 3-6 there will be some major exercises which will be taken and which will be concluded,” he added.

We expect core business to do better in the second half of the financial year, said Baheti.

On the growth front, he said, “On a consolidated basis we are looking at Rs 200 crore plus but this is at the beginning of the season. In the next couple of months once we get into the peak season and how the overall drought situation in Kenya works out or has an impact on the production, will reflect. If the damage is more than what is expected then the prices may jump substantially.”

key Highlights:

- Asset-monetization of group companies has been slower than expected

- Core business of the company looking far better now

- Tea is a seasonal business, liquidity issues tied to that

- Total loans to group companies as of March 31 stands at Rs 1,000 cr

- Expect deleveraging from holdco in the next 3-6 months

- Seajuli Developers & Finance is under the same promoter group

- Co has given loans to McNally Bharat via directing loans to group other cos

- Expect core business to do better in second half of the financial year

- Expect company's consolidated operating profit in FY20 at Rs 200 crore

- March salaries for executives have not been paid, will be paid in 10 days

- Monthly salary expense on executives is Rs 4 crore