Bajaj Hindusthan Sugar close to default: Care Ratings

MUMBAI: Lenders to Kushagra Bajaj-led Bajaj Hindusthan Sugar (BHSL) are staring at the possibility of the company turning into a non-performing asset as it may fail to arrange Rs 276 crore which was due on March 31.

These payments were part of upcoming instalment of optionally convertible debentures (OCDs) introduced during company's second restructuring started in 2022.

Care Ratings has warned that the company is likely to slip into default, putting lenders led by State Bank of India (SBI) on notice on their loans outstanding with the company. It downgraded the long-term rating for BHSL to 'D' from 'B+' citing the expected default on OCDs including interest amounting to Rs 276 crore, along with an additional amount for yield to maturity (YTM) premium payment, due on March 31, 2025.


"The company has confirmed to Care Ratings that it has been unable to secure approval from its consortium lenders for the conversion of the OCDs into equity and, as a result, is not in a position to service its debt obligations in a timely manner," the rating agency said in a note on its website.

Second restructuring plan
In 2022, Bajaj Hindusthan Sugar had proposed a second restructuring plan to lenders which included an elongated repayment schedule up to 2040 and conversion of some debentures into equity. Data on the BSE shows that all of the promoter stake of 25% has been pledged with lenders.

The second restructuring plan was proposed after the company had cleared some dues and standardised the account. In October 2023, the National Company Law Tribunal (NCLT) had dismissed an insolvency petition filed against BHSL by SBI after the company had cleared its dues. BHSL is one of India's largest sugar and ethanol producer.

"This company has been in and out of stress. Banks can only step in after there has been a default. So its fair to assume that this account will be discussed after it fails to repay on March 31," said a senior banker.

The total outstanding loans to banks by the company is currently unclear. Care highlighted the company's weak business profile with total loss of Rs 217 crore in the first nine months of the current fiscal.

"The rating is constrained by BHSL's weak financial profile characterised by its poor liquidity, leveraged capital structure, contingent liabilities due to the yield to maturity (YTM) payable upon the redemption of the OCDs, substantial investments in group companies, and the cyclical and regulated nature of the sugar business," Care said.

Liquidity stretched
It added that the liquidity position of the company remains stretched with free cash at just Rs 56 crore as on September 30 which will lead to a default of Rs 276 crore due on March 31, 2025, due to poor liquidity and insufficient accruals.

"The total unprovided YTM liability from the date of allotment of OCDs as on March 31, 2024 was Rs 2,885.4 crore and till December 31, 2024, it is Rs 3,412.5 crore," Care said.

YTM premium is payable at the time of redemption of OCDs pursuant to the first restructuring undertaken under the Scheme for Sustainable Structuring of Stressed Assets (S4A Scheme) back in 2027.