Lenders’ decision to declare Bajaj Hindusthan Sugar Ltd (BHSL) a non-performing asset (NPA) has caused uncertainties for cane farmers in Uttar Pradesh, given the company’s unpaid dues of Rs 2,860 crore to them for the current season.
Sources in the industry and farming circles say that lenders must opt for change in management and asset sales via the insolvency process to protect the interests of all stakeholders.
The previous two restructuring schemes aimed at salvaging the company had failed.
BHSL, the country’s largest sugar producer, was declared an NPA as it defaulted on payments related to debt of Rs 4,814 crore.
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.
In the just-concluded sugar season, 120-odd mills in the state had purchased cane worth Rs 35,198 crore from farmers. As on July 5, the unpaid dues to farmers by all mills in the state stood at Rs 7,400 crore.
Farmer leader VM Singh said the state government could not ensure that the company adhered to the 14-day payment cycle mandated under the Sugarcane Control Act. BHSL and a few other mills had kept farmers waiting for even 12-14 months for the payments to be cleared, even after the payment schedule was tightened, he added.
A Bajaj Hindusthan spokesperson said as a matter of policy, the company doesn’t comment “on speculation or market rumours”.
According to the company’s quarterly disclosure on loans to the exchange, as on June 30, the total financial indebtedness of the company, including short-term and long-term debt, stands at Rs 4810 crore. Out of the 12 banks that have an exposure to the company, State Bank of India has the highest exposure of Rs 1204 crore, followed by Punjab National Bank at Rs 1089, Indian Bank at Rs 511 crore, Central Bank at Rs 388 crore, Bank of Maharashtra at Rs 365 crore, IDBI Bank at Rs 347 crore.
Sources say that while BHSL has proposed another restructuring to come out of the crisis, it would be a difficult call for the lenders, as the previous two schemes hadn’t worked out.
“How will the company’s management explain why it has failed despite two restructuring schemes, while other companies are making profits? What is the guarantee that the third restructuring will be any different?,” one market source said.
An industry source said: “The best option for the lenders would be to use the NCLT route, even if it involves a haircut for them.”
Uttar Pradesh cane commissioner, Sanjay Bhoosreddy said the government was monitoring the situation closely. “We are aware of the matter and will take appropriate decision as the situation unfolds,” he said.
According to some industry players, the Bajaj group’s predicament is of its own making. “While a majority of the sugar companies operating in the state have been very prompt in payments to both lenders and the farmers, Bajaj mills have defaulted on both counts,” said the industry source. It would be prudent for the government to divert cane earmarked for Bajaj mills to better managed mills, the source added.
Another industry source said that in case lenders decide to put some of the Bajaj mills on the block, not many would be interested in the assets. “Any buyer will look at clean assets. Only if liabilities are taken care of through the NCLT process, interest could be generated in the assets,” he said.