India’s largest bulk tea producer, McLeod Russel has decided to exit from its loss-making Vietnam venture.
It has signed an agreement with a Vietnamese company for the sale of the business for a sum of US$2.15 million. The sale includes ownership of McLeod’s 3 gardens and 2 tea processing factories in Vietnam which is currently held by its subsidiary Phu Ben Tea Company Ltd (PBT).
McLeod entered Vietnam in 2009 by acquiring PBT from a Belgian company for a total cost of US$7 million, including $5 million in debt, as part of an overseas gamble. However, it has been a struggle to operate the business profitably.
During the year 2022, the Vietnam operations incurred a loss of US$2.91 million compared with US$4.51 million in 2021. In 2022, PBT manufactured only 0.63 million kg compared with 3.24 million kg in 2021.
Following the exit from Vietnam, McLeod will have only one overseas tea business in Uganda, Africa.
McLeod is also facing a major challenge to restructure its massive debt of Rs 1,700 crore (US$204 million) in India, and it is seeking to sell its tea gardens in the country.
