Bajaj Hindusthan Sugar plunges 17% after SBI's insolvency plea

Shares of Bajaj Hindusthan Sugar tumbled over 17% to hit a 52-week low of ₹8.37 on the Bombay Stock Exchange (BSE) on Wednesday after the State Bank of India filed an insolvency petition in the National Company Law Tribunal (NCLT) against the country’s largest sugar manufacturing company. The Mumbai-headquartered Bajaj group company reportedly owes ₹4,800 crore to a slew of banks such as SBI, Punjab National Bank, Central Bank of India, and Indian Bank.

SBI as a financial creditor has filed the petition at the Allahabad bench of the National Company Law Tribunal under the Insolvency and Bankruptcy Code, Bajaj Hindusthan Sugar said in an exchange filing on August 16. The company, however, did not disclose further details related to the insolvency petition. Generally, creditors drag a company to the insolvency court in case of non-payment of dues. If the court admits the petition, insolvency proceedings begin against the company.

Reacting to the news, Bajaj Hindusthan Sugar shares opened with a loss of 6.4% at ₹9.50 on Wednesday, against the previous closing price of ₹10.15 on the BSE. Extending opening losses, the sugar stock declined further to touch a 52-week low of ₹8.37, down 17.54%. The penny stock hit a 52-week high of ₹22.58 on April 22, 2022. The market capitalisation stands at ₹1,102 crore.

Bajaj Hindusthan Sugar’s financial condition remains fragile as it posted a consolidated net loss of ₹267.54 crore in the financial year 2021-22, and a net loss stood at ₹45 crore in the recently concluded June quarter of the current fiscal 2022-23 (Q1 FY23). The company has delayed payment of loan instalment and interest on debt securities, due to which its parent company's account was classified as non-performing assets (NPA).

“During the June '22 quarter, due to delayed payment of loan instalment and coupon rate interest on optionally convertible debentures the lenders have classified the Parent Company's account as Non-Performing Assets (NPA) as per the RBI regulations on loan classification,” the company said in its June quarter earnings report, which was released on August 16.

As per the exchange filing, the lenders of the parent company had signed an ICA (Inter Creditors Agreement) on January 28, 2022, for the resolution of the parent company's accounts. “As on June 30, 2022, the overdue amount out of the principal instalment of ₹108.60 crore due on March 31, 2022 was ₹8.96 crore (which was subsequently paid by July 6, 2022). Coupon interest on OCD for FY22 amounting to ₹78.37 crore (Net of TDS) due on 31.03.2022 has not been paid and will be treated as per the financial restructuring plan submitted by the Parent Company. Also, out of the principal instalment of ₹108.60 crore due on 30.06.2022, the amount paid till Aug 05, 2022 is ₹40.50 crore,” it said.

For the first quarter ended June 2022, the sugar manufacturer reported a net loss of ₹44.91 crore as against a net loss of ₹49.72 crore during the corresponding period last year. However, sales rose 13.11% to ₹1,529.92 crore in Q1 FY23, from ₹1,352.61 crore in June quarter of the last fiscal.