The Hindu Business Line : Bajaj Hindusthan mulls Rs 100-cr issue

BAJAJ Hindusthan Ltd (BHL) is planning a Rs 100-crore public issue to part-finance its estimated Rs 550 crore investment in four greenfield sugar plants with an aggregate cane crushing capacity of 28,000 tonnes per day (tcd) in western Uttar Pradesh.

"We plan to time the issue some time in November-December. The pricing will be at a discount to the market price prevailing around that period", Mr Shishir Bajaj, Chairman & Managing Director of BHL, said. He was speaking to visiting presspersons on the sidelines of a foundation laying ceremony for one of the four proposed plants here today.

Besides the Rs 100-crore targeted mop up from the public issue, the company would also raise loans of around Rs 200 crore for funding the project. ``The rest would mainly come from our own internal resources,'' Mr Bajaj stated.

For the year ending September 2003, BHL earned a profit after tax of Rs 28.35 crore on sales of Rs 458.27 crore. The company has a paid-up capital of Rs 8.73 crore and reserves and surpluses totalling Rs 113.17 crore.

BHL currently operates two plants at Golagokarannath (13,000 tcd) and Palia Kalan (11,000 tcd), which are both in Lakhimpur Kheri district of eastern Uttar Pradesh.

The proposed four greenfield units — each of 7,000 tcd capacity — are to come up in Kinnouni (Meerut), Bilai (Bijnor), Thanabhawan and Bhaisana (both in Muzaffarnagar).

Mr Bajaj said that out of the four new plants, the first one, at Kinnouni, would be commissioned by December to coincide with the new 2004-05 crushing season.

The company has already invested over Rs 100 crore in the project, which "will come up in a record nine months time, against the industry norm of 15-18 months for a plant of similar capacity,'' he claimed.

Mr Bajaj informed that the four new units would be `pure' sugar plants. "We do not intend to set up any distillery, paper-making or co-generation facilities in any of the new units now, though we have acquired additional land in the Kinnouni site to make provision for a distillery any time in the future. As of now, we intend to sell the entire quantity of molasses and baggase produced from the plants,'' he said.

According to him, BHL's existing two plants already have a combined ethanol manufacturing capacity of 145 kilolitres per day, "which makes us the biggest in the country.''

In the event of the four new plants being commissioned, the company would also become the country's No. 1 sugar producer with an aggregate cane crushing capacity of 52,000 tcd.

BHL's two existing plants have a sugar production capacity of 4.3 lakh tonnes (lt) per annum, which would go up to nearly 10 lt with the commissioning of the four greenfield units.

`Ready to pay Rs 100 per quintal'

SUGARCANE growers in West Uttar Pradesh are a harried lot today. Just when sugar prices were on the recovery path — promising better returns for their cane and an end to the problem of huge arrears owed by mills — the rain gods have failed them.

During the current monsoon season, West UP has received 50 per cent deficient rainfall. Although, the area has an extensive surface irrigation network — a legacy of colonial times — the extended dry spell throughout July meant that even the upper reaches of the canals had very little water. As a result, most farmers have had to keep their crop alive by pumping out groundwater.

Worse, in the absence of assured electricity supply, this has required using tractor-powered tubewells and submersible pumps, involving huge expenses on diesel. "If it rains well in July-August, we normally require about 10 irrigations during this period. This time, there were no rains in July, which forced us to go in for four extra irrigations", said Mr Vikram Panwar, an 8-acre farmer of village Bhainswal, near Shamli.

Providing a single irrigation for each acre takes roughly 5 hours. If a farmer uses a 7.5 horsepower pump, he would consume about 2 litres of diesel in a hour, which is about 10 litres per irrigation or 40 litres for four irrigations. All this translates into an extra expenditure of Rs 1,000 per acre, which is what the farmer would have had to incur this time round.

The expenses would be higher if one factors in the cost of labour for making the extra irrigations. "When it rains, we get not only the water but also the labour free from the gods", Mr Panwar observed. But even after burning the additional diesel, most farmers Business Line interacted with felt that cane yields this time will end up lower by 15-20 per cent.

"Instead of 25 tonnes an acre, we will be able to get only 20 tonnes this year", said Mr Jaipal Singh of village Chaprauli, Baghpat. This would imply that the cost of production of cane this year would have gone up by at least Rs 5 per quintal because of drought.

The CMD of Bajaj Hindusthan Ltd, Mr Shishir Bajaj, said that his company was ready to pay Rs 100 per quintal for normal varieties of cane in the coming season. This is against the Rs 95.50 per quintal that his factory at Golagokarannath paid in the 2003-04 season. That will just about cover the extra burden that the dry spell in July placed on the farmer.

The silver lining though is that August has been kind so far and it is this hope of continued showers, which is keeping the never-say-die spirit of the growers going for the moment.