State Bank of India (SBI) has initiated corporate insolvency resolution process (CIRP) against Bajaj Hindusthan Sugar Ltd (BHSL) before the Allahabad Bench of National Company Law Tribunal.

The development comes in the wake of lenders classifying their exposure to BHSL as non-performing during the June 2022 quarter due to delayed payment of loan instalment and coupon rate interest on optionally convertible debentures.

In a regulatory filing last month, BHSL disclosed that out of the ₹108.60 crore principal instalment due on June 30, 2022, it could pay only ₹26 crore, leaving ₹82.60 crore as outstanding principal instalment due.

A consortium of 12 banks had an aggregate exposure of ₹4,762.59 crore to BHSL as on July 30, 2022.

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The banks with more than ₹500 crore exposure to the company are: SBI (₹1,192.48 crore), Punjab National Bank (₹1,081.58 crore) and Indian Bank (₹507.46 crore).

“We understand that State Bank of India, financial creditor, through its advocate has initiated corporate insolvency resolution process of Bajaj Hindusthan Sugar Limited before the National Company Law Tribunal, Allahabad Bench under Section 7 of Insolvency and Bankruptcy Code 2016,” BHSL said in its filing.

The company slipped into the red, reporting a standalone net loss of ₹49.13 crore in the first quarter of FY23 against a net profit of ₹99.26 crore in the preceding (January-March 2022) quarter. It had reported a net loss of ₹40.55 crore in the year ago period.

“The losses were mainly attributable to high raw material (i.e., sugarcane prices) and other input costs, relatively lower realisation of sugar, higher depreciation and finance expenses.

“Market forces determine sugar prices based on the demand-supply situation and other market dynamics, which are external factors, and the sugar prices have been relatively lower over the years due to higher production of sugar in the country,” the company said in its notes to accounts along with the first quarter results.