McLeod Russel India : Annual Report 2022 - 23

ANNUAL REPORT 2022-23

CORPORATE INFORMATION

ANNUAL REPORT 2022-23

REPORT OF THE DIRECTORS

For the year ended 31st March 2023

Your Directors have pleasure in presenting the Twenty-Fifth Annual Report with the Audited Financial Statements of your Company, for the financial year ended 31st March 2023.

FINANCIAL PERFORMANCE

The operational turnover of the Company was lower at Rs. 1,09,669.66 lakhs against Rs. 1,10,853.44 lakhs in the last year, due to lower production (although selling price was higher) 'Loss before exceptional items' was 16,079.14 lakhs against Rs. 11,411.78 lakhs for the last year. The higher loss was mainly due to lower operational turnover (as above) and also due to increase in wage rate and other inputs.

The Statement of Profit & Loss for the year 2022-23 includes charge of Rs 93,342.16 Lakhs on account of 'Exceptional Items' being provision made in the year against Inter-Corporate Deposits and advance given in earlier years. This is part-provision, without prejudice to company's legal right to recover the amounts given by it.

The Company has not been able to meet terms of facilities/loans availed from various Lenders. The company has been in discussion with lenders for debt-resolution. Forensic audit, Techno Economic Viability Study (TEV), valuations, and credit-ratings have already been done satisfactorily. Meanwhile, lenders in addition to the above also requested for submission of the proposal for One Time Settlement ('OTS proposal') of their dues. The resolution process as stated above are under active consideration of the lenders and related plans and proposals are expected to be finalised after due consideration of all the related aspects and once finalised will be placed for necessary approval for implementation. The management is confident that with the bankers' support in restructuring/ settlement of their debt to a sustainable level and resultant rationalisation of cost of borrowing and other costs, induction of additional fund in the system by sale of assets or otherwise etc. and other ameliorative measures taken and/or proposed to be taken, the company will be able to generate sufficient cash- flow to meet its obligations and strengthen its financial position over a period of time.

SHARE CAPITAL

The Authorised Share Capital of the Company is Rs. 60,00,00,000/- divided into 12,00,00,000 equity shares of Rs. 5/- each and the Issued, Subscribed and Paid up share capital of the Company is Rs. 52,22,79,000/- divided into 10,44,55,735 equity shares of Rs. 5/- each.

During the year, the Company did not issue any shares with differential rights or convertible securities. The Company does not have any scheme for the issue of shares, including sweat equity to the employees or directors of the Company. The Company does not have a scheme for the purchase of its shares by employees or by trustees for the benefit of employees. The company securities have been suspended from trading on The Calcutta Stock Exchange Limited and the Company is in process of revocation for the same.

There was no change in the capital structure of the Company during the period under review.

RECLASSIFICATION OF PROMOTER AND PROMOTER GROUP

Subsequent to the closure of financial year, the Company at the request of Eveready Industries India Limited ('EIIL'), falling under Promoter and Promoter Group Category has applied for reclassification of EIIL from 'Promoter and Promoter Group' category to 'Public Shareholder' category with the stock exchanges. Approval is awaited from the exchanges.

TRANSFER TO GENERAL RESERVE

The Board has decided not to transfer any amount to the General Reserve for the year ended 31st March 2023 because of loss sustained.

DIVIDEND

In view of the loss sustained by the Company during the year under review, the Board decided to not recommend any dividend for the year ended 31st March 2023.

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ANNUAL REPORT 2022-23

REVIEW OF OPERATIONS

During the Financial year under review, fluctuating and inconsistent weather conditions resulted in a loss of harvest during peak cropping months. The saleable production of your Company was 414.29 Lakh Kgs tea, as compared to 489.04 Lakh Kgs in the previous year.

Emphasis in plucking standards remained a priority and quality of leaf harvested improved considerably, resulting in a better quality of teas produced. The Uprooting and Replanting Policy of your Company continued to remain in focus and has further improved the percentage of tea under fifty years which is now over 75% of the area. "Integrated Pest Management" practice continued as per past practice and was very effective resulting in improved pest control and reduced cost. Timely supply and application of fertilizer also controlled further crop loss. A high standard of Clonal Tea nurseries with requisite, approved Clonal Blend was established on all estates. The Shade Nurseries being of a good standard contributed as one of the key factors in developing a healthy plantation. The Afforestation program continues to be enhanced along with creation of new water-bodies, to improve the "micro-climate", in select areas which has become essential to counter the effects of climate change. Plantation of 'Agarwood' continued, for revenue enhancement, on some estates.

It has always been your Company's endeavor to produce Quality teas, which continued to command a premium, both in the domestic and international markets. Factory infrastructure and machinery was enhanced accordingly, to meet the requirements and Capital expenditure to further improve processes were accordingly sanctioned. To improve field operations and overcome the acute shortage of workers by way of absenteeism, additional investments in plucking Shears and Pruning machines were made available. Additions to the transport fleet included Tractors to aid field operations, and Ambulances to further improve the medical facilities.

The Company has thirty-one ISO 22000:2005 certified Factories which are in the process of upgradation to ISO 22000:2018. Your Company has twenty seven estates certified under "Rainforest Alliance." All our factories are certified under the "Trustea" certification and we are also in the process of assisting our suppliers of leaf from Small Tea Growers to become compliant under this certification.

Your Company also participates in the Ethical Tea Partnership forum for international buyers and producers to promote sustainable practices jointly. Due to such initiatives we have set up 'Community Development Forums' on some of our estates, to enable welfare schemes mandated by the Government to reach our communities as well as bring about better awareness and improve the livelihood of our workers and their families.

We have also over the last few years, engaged with various organisations including UN Women, IDH, Dharmalife, GAIN, BSR, Mercy Corps, ZvdZ Foundation, ETP and ITA to build awareness and provide responsible services among all levels of our employees, particularly women. Programmes such as 'Preventing Violence Against Women and Girls', 'Women's Safety Accelerator Fund', 'Work and Opportunities for Women', 'Global Alliance for Improved Nutrition', 'Project Sanitation' etc. now cover twenty-nine of our Estates in Assam and have proven to be most successful at building social awareness amongst women and children.

The Company performed well in the domestic and overseas markets and achieved a sales turnover of Rs 1,05,871.64 lakhs. Favorable feedback was received from all buyers both in terms of quality and deliveries. Your Company continues to be the leading producer-exporter of tea with shipments to over seventeen countries worldwide at an FOB/CIF value of Rs 28,830.35 lakhs.

CORPORATE INSOLVENCY RESOLUTION PROCESS ("CIRP") PROCESS INITIATED UNDER THE INSOLVENCY AND BANKRUPTCY CODE 2016

During the year under review, the Company was under Corporate Insolvency Resolution Process ("CIRP") pursuant to order dated 10th February, 2023, of Hon'ble National Company Law Tribunal, Kolkata Bench, Court II, Kolkata ("NCLT") and the Hon'ble NCLT had appointed Mr. Ritesh Prakash Adatiya, having registration number IBBI/IPA-001/IP-P01334/2018-2019/12013), as Interim Resolution Professional ('IRP') to perform the functions as mentioned under the Insolvency and Bankruptcy Code, 2016 (the Code) and the related rules and regulations issued thereunder. The powers of the Board of Directors was suspended and such powers had been vested with the IRP and had since taken control of the management of the Company.

Further, the Hon'ble National Company Law Appellate Tribunal, New Delhi Bench, New Delhi ("NCLAT") vide its Order dated 15th May, 2023, has closed the CIRP initiated vide order dated 10th February 2023 and has set aside the said order. The suspension of the Board of Directors of the Company has been revoked and the Company has been set free of the restrictions of the CIRP and IRP has also been relieved from his functions.

Further, Aditya Birla Finance Limited, State Bank of India, Shah Brothers and IndusInd Bank Limited (not registered) have filed applications before National Company Law Tribunal (NCLT), Kolkata for initiating Corporate Insolvency Resolution Process (CIRP) under Insolvency and Bankruptcy Code, 2016 which are being contested by the Company.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

In terms of requirements of Regulation 34(2)(e) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ('Listing Regulations'), a Management Discussion and Analysis Report is attached as Annexure - I forming part of this Report.

REPORT ON CORPORATE GOVERNANCE

In terms of requirements of Regulation 34(3) of the Listing Regulations, a Report on Corporate Governance together with the Auditors' Certificate regarding Compliance of Conditions of Corporate Governance are attached as Annexure II and Annexure III respectively, forming part of this Report.

SUBSIDIARY COMPANIES AND CONSOLIDATED FINANCIAL STATEMENTS

The Company has one wholly owned subsidiary namely, Borelli Tea Holdings Limited, U.K. (Borelli) and four step down Subsidiaries. Borelli is inter alia engaged in the business of investing funds in various companies engaged in tea production, blending and marketing activities. As at the end of the year on 31st March 2023 Borelli had the following Subsidiaries in different countries:-

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