Lenders tag Bajaj Hindusthan as NPA, debt recast plan under discussion

Bajaj Hindusthan has defaulted to banks, UP farmers; says restructuring proposal is in accordance with RBI circular of June 7, 2019

Lending banks have declared Bajaj Hindusthan Sugar, one of India’s largest sugar manufacturers, a non-performing asset (NPA) after it failed to make payments related to its debt, whose gross value stood at Rs. 4,814 crore as of March this year.

The payments were due on some loans at the end of March, according to executives of two of the lenders. The company also owes money to sugarcane farmers in Uttar Pradesh, the state where all its 14 sugar mills are located. The bank executives said Bajaj Hindusthan’s credit profile has been under pressure and it has delayed payments to lenders, thus becoming a non-performing asset as of end-June.

“The company has proposed a restructuring plan to the lenders that is currently under discussion. The promoters will have to bring in a certain amount as investment under the restructuring package in line with the Reserve Bank of India’s rules and ensure the promoters have skin in the game,” one of the executives said, asking not to be named. As per the BSE’s statistics, promoters own 25 per cent of the company’s equity.

A company advisor said the restructuring was being done as per the RBI circular of June 7, 2019, and talks with banks were currently on. A Bajaj Hindusthan spokesperson declined to comment.

The company’s shares closed at Rs 13 apiece on Tuesday, adding up to a market valuation of Rs 1,684 crore.

Bajaj Hindusthan describes itself on its website as India’s “number one sugar and ethanol manufacturing company” with a sugarcane crushing capacity of 136,000 tonnes crushed per day and a distillery capacity of 800,000 litres of alcohol per day. It was at the centre of a settlement in the Bajaj family, whose branches span two- and three-wheelers, finance, consumer goods, and many other business segments. The settlement saw Shishir Bajaj, brother to the late Rahul Bajaj, break away in 2008. Kushagra Bajaj, Shishir’s son, is chairman of Bajaj Hindusthan.

In its March quarter results, the company said it had issued Optionally Convertible Debentures (OCDs) worth Rs 3,483 crore to the Joint Lenders' Forum (JLF) as per the Scheme for Sustainable Structuring of Stressed Assets towards the conversion of a part of the unsustainable debt. This provides the holder an option to exercise the right to convert the outstanding OCDs into the equity shares at a price in accordance with applicable laws.

As of March this year, the company owes Rs 1,784 crore to lenders as premium on its optionally convertible debentures and treated it as a contingent liability. In its note to the accounts, the company said it would be accounted for as finance cost at the time of redemption of the OCDs.  The auditors of the company have drawn qualification for non-provision of YTM premium up to March 31, 2022.

The company has received a sum of Rs 1,000 crore, in two tranches of Rs 500 crore each on January 21, 2022 and February 3, 2022, respectively, in escrow accounts maintained exclusively for cane price payment for each of its 14 sugar units from Uttar Pradesh Power Corporation through the cane commissioner of Uttar Pradesh. The amount was paid to the cane growers towards the cane payment arrears for sugar season in the last two years.