McLeod Russel expects $2m revenue from Rwanda acquisition

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McLeod Russel expects $2m revenue from Rwanda acquisition

McLeod Russel just completed 60% acquisition of a Rwandan tea company. Aditya Khaitan, managing director of the company spoke to CNBC-TV18 about this and the way forward for the company.

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McLeod Russel just completed 60% acquisition of a Rwandan tea company. Aditya Khaitan, managing director of the company spoke to CNBC-TV18 about this and the way forward for the company.

He says that the small company that produces just about two million kilogram of tea, yields high profit margins, and therefore, it must contribute around USD 2 million in terms of revenue for McLeod.

"Overall, the three overseas acquisitions of the company (in Rwanda,Uganda and Vietnam) are doing really well and are likely to bring in Ebitda of nearly USD 50 million in the current year," he says.

Below is the edited transcript of the interview. Also watch the accompanying video.

Q: Does this 60% acquisition now get consolidated into the P&L of the listed stock, should we therefore expect a bump up in revenues in the listed stocks?

A: This has been bought over by Borelli Tea Company which is a 100% subsidiary of McLeod Russel and will get consolidated with out Ugandan and our Vietnam companies. So yes, it does get consolidated. It's been a very important transaction for us because it is one of the better tea estates in Rwanda and fetches the highest price in the African market in the Mombasa tea auctions. So we are happy that it's been finally sorted out and the company is doing very well. It's a feather in the cap that we been able to get such a tea estate in McLeod Russel group.

Q: You mentioned that you are possibly looking at further acquisitions etc, tell us how much are you possibly going to chalk out in terms of funds for that and how exactly are you funding it?

A: Our debt position is very low. This year we would have cash generation of over Rs 250 crore, and that should be more then enough for us to take care of our debt repayment as well as our capex requirement. So we basically are not in any problem regarding funds from any public issue or stake sale. It will be through internal accruals.

This year, tea has done very well. McLeod Russel has come up with their best second quarter results and our third quarter also is going to be equally good. We should come up with best results this year in spite of India having higher production compared to last year, but overall we have been able to make a better quality standard this year which has fetched a better price.

So all in all, with a better price realisation and our higher production, and our overseas acquisitions paying off, I think this year will be one of the better years of the company.

Q: Should we expect full-year run rate of over 15%?

A: It's little difficult because we still have one more quarter to go and may have about 15% or maybe 20% of our sales still to go. As of now, we are running at around Rs 5 higher than last year. I think we should be able to hit much higher profit. Little difficult for me to give exact numbers, but I think we will be able to come up with better numbers than expected.