Bajaj Hindusthan explores hydel foray

With sugar revenues expected to remain buoyant, company will use the cash flows to invest in power business.

The Shishir Bajaj-promoted Bajaj Hindusthan, the country’s biggest sugar producer, plans to foray into the hydro power sector. This, even as the company looks to add thermal power capacity in excess of 1,200 Mw with an investment of Rs 6,000 crore.

The company has shortlisted Uttar Pradesh, Rajasthan and Maharashtra to set up thermal power capacities, primarily based on indigenous coal. It is now exploring sites for hydro power projects, which, according to sources, is still in the initial stages.

“Revenues and margins from the sugar business have been buoyant and are expected to remain so, at least for the next six-eight quarters. Since the company has no plans to expand the sugar business, it will be using the cash flows to repay debt and invest in the power business,” an informed source said.

The Bajaj Hindusthan group runs 16 sugar mills, all in UP. A company spokesperson declined to comment on the plans.

In November last year, the company announced plans to invest Rs 1,600 crore to set up five coal-based power plants, with a total capacity of 400 Mw.

These are being set up at five locations on land adjacent to the company’s existing sugar factories in UP. These are likely to be operational in the second half of next calendar year.

The company has applied to the Union Ministry of Coal for coal linkages and is also scouting overseas for coal mines.

At present, Bajaj Hindusthan’s overall captive power capacity stands at 430 Mw. But, with India being a power-deficit country and its peak power deficit being in excess of 12 per cent, the company plans to have a bigger presence in the power sector.

Other attempts to diversify, too In the recent past, Bajaj Hindusthan has tried to diversify into segments like bagasse-based particle board and medium density fibre (MDF). It has set up three plants to manufacture 50,000 cubic metres of particle board and 160,000 cubic metres of MDF.

It has also ventured into ethanol production from molasses, a by-product of sugar mills.

The purpose behind the diversification is to insulate and cushion uncertainties in the sugar business.

Sugar has been a politically sensitive commodity in India and attracts regular policy intervention, both at the central and state level.

For the quarter ended December 31, Bajaj Hindusthan reported a net profit of Rs 85 crore on net sales of Rs 615 crore.

For the year ended September 30, 2009, the company reported a net profit of Rs 154 crore on net sales of Rs 1,583 crore.