InvestorQ : I am holding shares of McLeod Russell in my portfolio for the last many years. I find that the stock has fallen nearly 50% in the last few days. What should I do?
Tisha Malhotra made post

I am holding shares of McLeod Russell in my portfolio for the last many years. I find that the stock has fallen nearly 50% in the last few days. What should I do?

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Moii Chavate answered.
1 year ago
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There have been various reasons for McLeod Russell sharply correcting in the last few days. As you know, it is the flagship tea manufacturer and part of the B M Khaitan Group. The big hit for the company came from an unfavourable demand / supply scenario as the company has consistently seen production rising but demand not rising in tandem. Also, the Iranian team demand is expected to meet some pressure after the sanctions and India stopping the purchase of Iranian oil. The company also has a debt problem with ICRA recently downgrading the company to Negative outlook as it felt that the profit generation was insufficient to service the debt.

Of late there have been announcements of asset sales by the company due to the tight financial situation and that is what triggered the actual sell-off in the stock in the last few days. For example, the company has sold assets of its Addabarie Tea Estate, Mahakali Tea Estate and the Diral Tea Estate. McLeod Russell looks like a structural problem and we don’t see too much of a logic in holding on to the stock. One must look to exit and reallocate.

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