State Bank of India moves NCLT to recover dues from Bajaj Hindusthan Sugar

The sugar and ethanol producer owes nearly Rs 4,800 crore to banks

State Bank of India, the country’s largest lender, has moved the National Company Law Tribunal’s (NCLT’s) Allahabad Bench against Bajaj Hindusthan Sugar because the company has not repaid its dues.

The SBI petition, filed under the Insolvency and Bankruptcy Code, 2016, is yet to be admitted by the tribunal, said a banking source. The company owes banks Rs 4,771 crore and has availed itself of two debt-restructuring schemes, leading to steep haircuts taken by the lenders.

According to top SBI officials, the troubled entity has to come up with a proper offer and if it is feasible, there is an option to withdraw the application.

The promoters, who own 24.95 per cent in the company, are expected to bring in Rs 1,500 crore for any proposal to be considered. Besides, the company has to pay sugarcane arrears worth Rs 2,900 crore to farmers as of July 2022. That is almost 44 per cent of the sugarcane dues payable to growers in UP.

“This is a sensitive issue in Uttar Pradesh and lenders have to be mindful about it,” a banker said.

When contacted, a Bajaj Hindusthan Sugar spokesperson said the company had not received any intimation on this matter from the banks and as a policy could not comment on market talk. SBI did not reply to an email sent on Thursday.

Bajaj Hindusthan Sugar has 14 factories with an aggregate capacity of crushing 136,000 tonnes of sugarcane a day. It has six distilleries with the capacity to produce 800 kilo litres of industrial alcohol a day. For FY22, the company reported revenues of Rs 5,569 crore and a loss of Rs 218 crore.

On Friday, the company said in a stock market statement that its optionally convertible debentures worth Rs 3,483.25 crore, issued to the Joint Lenders’ Forum (JLF) in accordance with the Scheme for Sustainable Structuring of Stressed Assets (S4A Scheme) for converting part of the unsustainable debt into equity, provides the holder the option to exercise the right.

The company has not taken the provision on coupon rate interest on such OCDs and has not considered YTM (yield to maturity) after March this year. The management is of the view that the coupon rate interest and YTM will be treated in accordance with the financial restructuring plan submitted by the company to the lenders.

But the auditors have drawn qualifications for non-provision of YTM premium up to June 30, 2022, as well as coupon interest on OCDs for the quarter ended on June 30, 2022.

Bajaj Hindusthan had more than a 12 per cent share in the sugar produced in Uttar Pradesh in the season of 2021-22, which will end in September, and an over 13 per cent share in the number of farmers directly associated with the sugar sector. It operates 14 sugar mills in UP, making it one of the largest companies in the sector.

The company was incorporated in 1931 in the name The Hindusthan Sugar Mills (HSML) by Jamnalal Bajaj. Its financial metrics deteriorated after the company split from Rahul Bajaj’s family in 2008 and came under the control of his brother Shishir Bajaj.

Shishir’s son Kushagra is chairman and has been at the helm since October 2014.