Business | Sugar
Published Nov 2, 2023
By Deborshi Chaki, ET Bureau
Bajaj Hindusthan Sugar, one of India's largest sugar and ethanol producers, is looking to turn the corner by putting its debt issues behind. In an interview, chairman Kushagra Bajaj told ET's Deborshi Chaki about the group's plans to infuse fresh equity into the business, which will entail zero haircut for the lenders...
Where are you with your conversations with the lenders of Bajaj Hindusthan to reach a settlement?
There was an error of judgment on our part when we defaulted and, by the time we rectified the mistake, the matter had already reached NCLT. However, as part of efforts to revive the company, we have offered to invest Rs 2,500 crore as fresh equity of which Rs 1,000 crore has already been infused. As things stand, we are in active discussions with our lenders for a resolution, which will entail zero haircut for any of our creditors. We are hoping that the resolution plan will be a win-win for all our stakeholders which includes our employees, investors and thousands of farmers who are part of the group’s extended family. We are mindful of our legacy of trust, transparency and fair play, and it is a business which has been in the family since 1926. We truly value our relationships with our stakeholders, especially lenders. We have a track record of honoring our commitments to them for close to 100 years now.
What timelines are you looking at with regard to reaching a settlement with banks?
I wish it happened yesterday, but things take time. Operationally there has never been any problem with the company and the real issue here is the extra debt that we took upon us. From a production perspective Bajaj Hindusthan is still the largest producer of sugar and ethanol. We have 14 manufacturing plants, and they are all optimally operational. The issue is on the debt side and not on the operation side. We are in active discussions with lenders, the details of which I am not at liberty to share at this juncture for obvious reasons. However, let me assure you that we are working overtime to reach an agreement and are hopeful it will happen sooner.
Are you still pursuing your plans to list the power business?
We had received the approval for an IPO around five years ago but we did not go ahead with it at that time owing to mismatches in valuation. While we understand that the power sector has since then undergone a massive transformation and many power companies have been re-rated, we don’t see the need to raise any equity now. The business is generating enough cash and as I said before we will be able to meet all our needs through internal accruals.
Overall, where do you see the group headed and what will be the growth levers?
The group is now generating yearly free cash flows of around Rs 2,000 crore which will become Rs 3,000 in a couple of years. We see ourselves as being debt-free going ahead. Alongside, we have started working on a Rs 24,000-crore capital expenditure plan which will be used to grow existing and new business. I don’t see us raising any new equity or debt for this purpose.
Given the overall market opportunity, do you believe the group’s consumer business has realised its full potential?
We are getting there. You’re right the consumer business has been more of a miss than a hit. But we are working to change that. The problem is that we have not been able to get our strategy right so far. While we have strong cash flows and we are the market leader in the light hair oil category, we feel we haven’t yet cracked the right growth strategy. So, over the next year or so, we have to get our strategy right on paper, and then go for execution. Unfortunately, over the last 24 months, we’ve had the perfect storm due to the pandemic and accompanying factors. Rural markets had slowed down to zero growth, and negative growth. Raw material prices were at an all-time high, and we have launched new products, so advertising spends were at a high. We have gone into e-commerce and exports in a big way. Our advertising and sales promotion has gone up disproportionately. We have an outstanding professional team with each business run by high-caliber leaders reporting to the CEO. I think we need to get our strategy in place and that’s what we’re working on as I said.