McLeod Russel has signed an agreement to sell three of its tea estates located in the state of Assam to Luxmi Tea Company for an estimated value of nearly INR1.5bn ($21m).

As part of the agreement, McLeod Russel will sell Addabarie Tea Estate, Mahakali Tea Estate and Dirai Tea Estate assets. Together, the three sites contributed around INR770m ($11m) to McLeod Russel’s turnover in the 2018 financial year.

Luxmi Tea is engaged in the growing, manufacture and sale of tea. McLeod Russel intends to use proceeds from the divestiture to reduce its debts and make new investments in its existing tea estates.

“The company had entered into a non-binding term sheet with Saffron Enclave inter alia for the sale of specified assets of the aforesaid three estates, which has expired on 31 March 2019.”

The company also plans to focus on its packet tea business and enhance its presence in this segment.

Last September, McLeod Russel signed an agreement to sell its Addabarie, Dirai, Mahakali and Rajmai tea estates in Assam with a total capacity of 5.07 million kilograms to Saffron Enclave for INR1.8bn ($25.8m).

However, since the non-binding term sheet with Saffron expired on 31 March this year, it entered into an agreement with Luxmi Tea.

McLeod Russel stated in its notification to the stock exchanges: “The company had entered into a non-binding term sheet with Saffron Enclave inter alia for the sale of specified assets of the aforesaid three estates, which has expired on 31 March 2019.”

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Completion of the deal is subject to approvals from regulatory authorities.

McLeod Russel chief financial officer KK Baheti told BusinessLine that the company’s debt is expected to be around INR9bn ($128m) by March this year, a decrease from INR15bn ($214m) in September last year.