The cost of borrowing for Shree Renuka Sugars, owned by Singapore-based agriculture major Wilmar International, is set to increase.

This is because the RBI is insisting that banks declare the loans extended to the company as non-performing assets (NPAs) even after it was restructured last year with fresh capital infusion.

Early last year, Wilmar Sugar Holding had increased its stake in Renuka Sugars to 38.57 per cent from 27.24 per cent as part of a debt-restructuring process. It made an open offer in June to raise its holding further to 58.34 per cent with a cumulative investment of ₹1,200 crore.

Wilmar also gave a guarantee of ₹2,700 crore as part of the debt resolution. Renuka Sugars’ standalone debt at the end of September 2019 was ₹2,117 crore.

IBC norms

Even as the debt was being restructured, the RBI, in a circular issued on February 12, 2018, said the resolution process shall be implemented as per the Insolvency and Bankruptcy Code (IBC) in respect of loan accounts with aggregate lenders’ exposure of ₹2,000 crore and above as on March 1.

This, it said, included accounts where resolution may have been initiated under any of the existing schemes and accounts classified as restructured standard assets.

Following this circular, the RBI directed banks to declare the Renuka Sugars account as an NPA and initiate the debt recovery process. Once an account is declared an NPA, fund-raising becomes a costly affair as its credit rating will go several notches down, said a banker.

Renuka Sugars is now planning to drag the RBI to the Supreme Court, sources said.

For the December quarter, the company registered a net profit of ₹69 crore, against a net loss of ₹2,529 crore in the previous year period on the back of ₹87 crore in forex gains. Its revenue stood at ₹1,093 crore (₹1,759 crore).

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