Mawana ropes in JM Financial to sell sugar unit

Deal could fetch up to Rs 400 cr

Siddharth Shriram-promoted Mawana Sugars has put its Titawi sugar mill on the block to bring down the debt and clear sugarcane dues to farmers. The company is learnt to have roped in financial services firm JM Financial to find a buyer. Based on the cost of replacing a mill of such capacity, Titawi could fetch up to Rs 400 crore.

"The company is making efforts to raise money as it has been unable to service banks' debt and make timely payment to farmers. On the company's behalf, JM Financial is looking for a buyer," said a person familiar with the development. When contacted, Shriram declined to comment.

Mawana, a well known brand in the retail sugar market, owns and operates three sugar mills in the sugarcane-rich belt of Western Uttar Pradesh, the country's largest sugar and sugarcane-producing state. The three mills together have a capacity to crush 29,500 tonnes of sugarcane daily. Titawi (in Muzaffarnagar) is the company's second biggest unit with a capacity of 10,500 tonnes and a bagasse-based power generation unit of 17 Mw.

In the 2015-16 sugar season (October-September), Mawana's three mills purchased sugarcane worth Rs 610 crore from farmers. However, till date it has managed to clear less than half the payments and owes Rs 320 crore. The firm needs to clear the entire dues for smooth functioning in the new sugar season that started early this month. Last year, the firm had faced issues with sugarcane supply from farmers due to previous arrears. The firm's long-term liabilities are estimated to be close to Rs 300 crore.

Mawana, a BSE-listed company, made a one-time settlement with debtor Axis Bank in September. Against its total due of Rs 81.8 crore, the company will repay Rs 33 crore in four instalments up to March 2017. In March, the company initiated a debt restructuring programme with Edelweiss Asset Reconstruction Company, which had overtaken debts owed by the company to State Bank of India and State Bank of Travancore.

Like most sugar companies, Mawana has incurred losses for the past few years due to a mismatch between sugar and sugarcane prices. However, with an uptick in prices and a drop in domestic output, the situation has improved in the recent months. An industry executive said that a sustainable business in sugar is going to be difficult until the sugarcane price is linked to sugar realisation.

"It'll not be easy to find buyers for a sugar mill even in this improved industry scenario. Moreover, only companies with a presence in Uttar Pradesh (UP) may be willing to invest if they find an attractive deal," he said. The country's top sugar companies such as Bajaj Hindusthan, Balrampur Chini and Triveni Engineering have all their operations in UP.