State Bank of India (SBI) has initiated insolvency proceedings against Bajaj Hindusthan Sugar following the classification of the company’s loans as non-performing asset (NPA) last month.

“We understand that State Bank of India, financial creditor through its advocate has initiated corporate insolvency resolution process of Bajaj Hindusthan Sugar Limited before the Hon’ble National Company Law Tribunal, Allahabad Bench under Section 7 of Insolvency and Bankruptcy Code 2016,” Bajaj Hindusthan said in a communication to the stock exchanges.

The sugar manufacturer owes banks Rs 6,090.58 crore, according to a rating report by Care Ratings dated December 24, 2021. The NPA tag was the result of a default on loans worth Rs 4,814 crore.

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One of India’s largest sugar manufacturers, Bajaj Hindusthan has a network of 14 mills across Uttar Pradesh, an aggregate sugarcane crushing capacity of 136,000 tonnes crushed per day (TCD) and alcohol distillation capacity of 800 kilolitres per day (KLD). The company is also in the business of manufacturing ethanol.

Bajaj Hindusthan’s loans worth Rs 6,777 crore were downgraded to ‘D’, or default grade, by Care Ratings in January 2021, citing delays in debt servicing by the company. The agency reaffirmed its rating in the December 2021 report, taking into account the poor liquidity position of the company and its upcoming debt obligations on the back of significant cane dues. “The rating continues to remain constrained by BHSL’s leveraged capital structure, substantial investment in group companies and cyclical & regulated nature of sugar business,” Care Ratings said in the December 2021 report.

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FE reported last month that Bajaj Hindusthan owes cane farmers in Uttar Pradesh dues to the tune of Rs 2,860 crore for the current season. As on July 5, the company paid only 35% of its total cane dues of Rs 4,398 crore to farmers who supplied cane to its 14 mills in the state.

Bajaj Hindusthan’s shares ended at Rs 10.15 on the BSE on Tuesday, down 5.05% from their previous close.