Mawana sells Titawi for Rs 375 cr to Indian Potash

Rs 150 cr for farmers dues and Rs 225 cr to go to clear debt

Siddharth Shriram-promoted Mawana Sugars has decided to sell its Titawi Sugar Mill in Uttar Pradesh for Rs 375 crore to Indian Potash, a government-owned fertiliser company.

Of this amount, Rs 150 crore will go towards settlement of sugarcane farmers’ dues and the rest will be used to trim the debt of Mawana. 

“This will be a good fit for Indian Potash, which now operates some small sugar mills,” said an official at Mawana. “This acquisition will allow it to have bigger scale and help us in turning healthier and reduce our debt.”

The company had recently roped in JM Financial to find a buyer for the Titawi mill. Indian Potash, a leading potash company, had entered the sugar space about five years ago by acquiring small mills from UP Sugar Corporation.

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 the state. The three mills together have the capacity to crush 29,500 tonnes of sugarcane daily. 

The Titawi (in Muzzafarnagar) unit is the company’s second biggest one with a capacity of 10,500 tonnes and a bagasse-based power generation unit of 17 Mw. Titawi brought close to 25% of the company’s revenue of Rs 1,485 crore in FY16. 

An industry official said Mawana had managed to strike an extremely smart deal. “We did not expect the mill to fetch more than Rs 250 crore, considering the sugar economy has been under pressure for the last few years,” he said. 

In the 2015-16 sugar season (October-September), Mawana’s three mills purchased sugarcane worth Rs 610 crore from farmers. However, it still owes about Rs 300 crore to farmers. In the last year, the company had faced issues with sugarcane supply from farmers due to previous arrears. The company’s long-term liabilities are estimated to be close to Rs 300 crore. 

Mawana, listed on the BSE, made a one-time settlement with debtor Axis Bank in September. Against its total due of Rs 81.76 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.

Mawana, like most sugar companies, have been incurring 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 had improved in the recent months.  An industry executive said a sustainable business in sugar was going to be difficult until sugarcane prices were linked to sugar realisation. The country’s top sugar firms such as Bajaj Hindusthan, Balrampur Chini and Triveni Engineering have all their operations in UP.